Nigeria’s external debt has seen a significant surge, reaching N28 trillion, according to recent findings. This increase is attributed to the devaluation of the Nigerian naira against the United States dollar.
As of the end of the third quarter of 2023, Nigeria’s total debt stood at N87.38 trillion, with the external debt constituting N31.98 trillion ($41.5 billion). This external debt encompasses loans from various financial institutions, Eurobonds, syndicated loans, and other sources.
A breakdown of the data reveals that Nigeria’s external debt includes multilateral loans from organizations like the International Monetary Fund, the International Development Association, and the African Development Bank. Bilateral loans, such as those from the Exim Bank of China and the Agence Francaise Development, as well as Eurobonds and syndicated loans, also contribute to the total.
However, the continued devaluation of the naira has led to a significant increase in Nigeria’s external debt. Between January 1, 2024, and February 29, 2024, the naira fell from 891/$ to 1,609/$, representing a decline of 80.58%. This depreciation has resulted in a substantial increase in the country’s external debt.
Despite warnings from experts and global lenders against over-reliance on debt for development, Nigeria continues to seek more funding through borrowing. Plans for a $1.5 billion budget support loan from the World Bank indicate the government’s ongoing borrowing activities.
However, concerns about debt sustainability persist. The International Monetary Fund has projected that Nigeria may spend nearly 100% of its revenue on debt servicing by 2026. The World Bank also warned that Nigeria’s debt, while seemingly sustainable, is vulnerable and costly.
In light of the significant depreciation of the naira, experts suggest that the Debt Management Office (DMO) may need to reconsider its debt management strategy. The current economic challenges, including low revenues and foreign exchange scarcity, necessitate a reassessment of Nigeria’s borrowing practices to ensure long-term financial stability.
