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FG’s increased borrowings push Nigeria’s Debt-to-GDP ratio past 50 percent

Nigeria’s debt-to-GDP ratio surpassed 50% for the first time, according to the latest public debt figures published by the Debt Management Office (DMO). The country’s public debt now totals N121 trillion, comprising N65.6 trillion in domestic debt and $42.1 billion in foreign debt (equivalent to N56 trillion).

As of December 2023, Nigeria’s total gross domestic product (GDP) was N229.9 trillion in nominal terms, with a real growth rate of 2.74%. This pushed the debt-to-GDP ratio above 50%.

Recent GDP and Debt Figures

In the first quarter of 2024, Nigeria’s nominal GDP was N58.5 trillion, up from N51.2 trillion in the same period in 2023. The nominal GDP figures for the second and third quarters of 2023 were N52.1 trillion and N60.6 trillion, respectively. The fourth quarter GDP rose to N65.9 trillion, bringing the trailing four-quarters GDP total to N237.5 trillion. Based on the 2023 GDP figure of N229.9 trillion, Nigeria’s debt-to-GDP ratio is 52.9%. Using the trailing four-quarter GDP figure of N237.5 trillion, the ratio stands at 51.2%.

Implications of the Rising Debt-to-GDP Ratio

Nigeria has often touted its ‘low’ debt-to-GDP ratio as a sign of economic resilience, implying room for more borrowing. For comparison, as of 2023, Ghana had a debt-to-GDP ratio of about 84.9%, South Africa 72.2%, Kenya 70.1%, and Egypt 95.8%. Despite these higher ratios, Nigeria has struggled with high debt service-to-revenue ratios. With the debt-to-GDP ratio now exceeding 50%, Nigeria faces limited borrowing capacity amidst ongoing economic challenges.

Nigeria’s Escalating Debt Profile

Over the past eight years, Nigeria’s debt profile has risen significantly due to fiscal challenges, including low crude oil revenues and increasing budgetary expenditure. Under the Buhari administration, public debt grew from N12.6 trillion in 2015 to N97.3 trillion in 2023. Between December 2023 and March 2024, public debt increased by N24.3 trillion. The DMO attributed this rise to fresh borrowing and naira devaluation. In the first quarter of 2024, fresh borrowing amounted to N7.71 trillion, including N2.81 trillion as part of new domestic borrowing and N4.90 trillion for the securitization of the N7.3 trillion Ways and Means Advances approved by the National Assembly.

Global ratings agency Moody’s noted that interest spending on debt might consume up to 36% of the federal government’s revenue in 2024.

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