In a significant fiscal development, Nigeria’s total public debt has surged to N87.38 trillion in the second quarter of 2023, a remarkable increase from N49.85 trillion in the first quarter of the same year. This alarming rise represents a staggering 75% growth compared to the previous quarter and a jaw-dropping 103.92% increase when compared to the same period in 2022 when the debt stock was at N49.85 trillion and N42.85 trillion, respectively.Thank you for reading this post, don't forget to subscribe!
Breaking down the figures, domestic debt now stands at N54.13 trillion, a significant jump from N30.21 trillion in the first quarter of 2023. This surge is primarily due to the inclusion of the N22.7 trillion securitized Ways and Means. Meanwhile, external debt has climbed to N33.25 trillion in the second quarter of 2023, up from N19.64 trillion in the previous quarter. This represents a 69.30% increase over the last quarter and doubles the figures from Q2 2022 when external debt was at N16.62 trillion.
The sudden spike in external debt can be attributed to the naira devaluation following the exchange rate adjustment on June 14th. Consequently, the external debt calculation employed the N770.38 exchange rate on June 30th, 2023, as opposed to the N460.15/US$ used in Q1 2023.
Domestic debt forms a significant portion of the total debt at 61.95%, leaving 38.05% from external debt. Federal government debt dominates at 89.5%, while States & FCT account for 10.5%. Notably, debt servicing for Q2 2023 amounted to N565.88 billion for domestic debt and N283.70 billion or US$368.26 million for external debt. Surprisingly, these debt servicing figures are lower than those of Q1 2023, despite the naira devaluation. This can be attributed to the absence of any domestic principal repayments and reduced Eurobond interest payments.
The ballooning debt in a country struggling with revenue and reserves growth raises serious concerns about debt sustainability. Debt repayment threatens to absorb a significant portion of revenue, leaving little for essential capital expenditure required to stimulate economic growth. This implies that debt-servicing-to-revenue and GDP ratios will continue to rise, exceeding the 80.6% and 23.4% recorded in 2022. While the Debt Management Office (DMO) had previously hinted at a debt-to-GDP ratio of 37%, nearing the 40% self-imposed limit and the 55% global limit, the current administration suggests a potential slowdown in debt accumulation. Nevertheless, analysts anticipate that these debt figures could negatively impact the bond market, potentially leading to more exits and reduced subscriptions in new auctions.