Nigeria’s domestic debt has surged by a staggering 132 per cent, reaching an alarming N51.96 trillion at the close of 2023. This momentous increase has sparked concerns and discussions about the country’s financial stability and its implications for the future.
Patience Oniha, the Director-General of the Debt Management Office, unveiled this disquieting revelation in a recent interview with CNBC Africa, emphasizing the critical necessity of establishing an African Debt Managers Initiative Network. She highlighted the exponential growth of Nigeria’s new domestic income, which skyrocketed to N7 trillion in 2023 alone.
“In 2023, our new domestic borrowing escalated to a significant N7.04 trillion, and I am pleased to announce that this amount has been entirely raised,” Oniha disclosed. “The comparison with the previous year’s N3.5 trillion unequivocally illustrates the substantial opportunities that the debt market presents for raising essential funds.”
The trajectory of Nigeria’s domestic debt is evident in the tangible records, with the total domestic debt standing at N22.21 trillion by the end of December 2022. However, this figure witnessed a remarkable surge to N48.32 trillion by the end of June 2023, primarily attributed to the inclusion of the N22.71 trillion securitized FGN’s Ways and Means Advances, reflecting in domestic borrowings, and the aforementioned N7.04 trillion new domestic borrowing, ultimately culminating in the formidable N51.96 trillion domestic debt at the close of 2023.
The government’s proactive engagement with the domestic market has been underscored by continued auctions and remarkable subscription levels, combined with modest interest rates below the monetary policy rate. Oniha underscored, “It distinctly indicates the prevailing liquidity, affirming the government’s anticipation of sustained activity in the domestic market throughout 2024.”
The prevailing uncertainties in the foreign debt market, exacerbated by the Russia-Ukraine war, have instigated a sense of caution among foreign investors, leading to heightened risk aversion. Oniha expounded, “Foreign investors are gravitating towards triple A or double A rating securities, lured by the allure of high rates ranging from four to five per cent.”
In this challenging financial landscape, Oniha emphasized the imperative for the government to fortify its revenue generation endeavors across all levels. She expressed optimism about the potential shift in the revenue narrative, evinced by the establishment of a presidential committee on fiscal reforms and taxes, which is expected to culminate in a tangible surge in revenues.
With an eye on the Medium-Term Expenditure Framework (MTEF) for 2024 to 2027, Oniha underscored the pivotal role of augmented revenues in reducing the imperative for borrowing. “Elevated revenues not only alleviate the need for borrowing but also empower the government to expand its service offerings, all while constricting the debt-service to revenue ratio,” she expounded.
Notably, Nigeria’s total public debt stock, encompassing both external and domestic debts, had burgeoned to a monumental N87.38 trillion as of June 30, 2023, as disclosed by the DMO, underscoring the gravity of the nation’s financial predicament.
