Nigeria’s total public debt up 48.5% to N144.7trn in FY'2024

Nigeria's total public debt has surged by 48.5% to 144.7 trillion naira at the end of 2024, reflecting a significant increase in both external and domestic borrowings. The Central Bank of Nigeria also injected 197.71 million dollars to support liquidity in the FX market, highlighting the challenges and opportunities facing the country's economy. Femi Oladehin, a Partner at Argentil Capital Partners, provided insights on the debt expansion and its implications for Nigeria's fiscal landscape. Oladehin emphasized the importance of analyzing the key drivers behind the debt growth and assessing the utilization of borrowed funds. He stressed that while debt accumulation is not inherently negative, the focus should be on the cost and potential benefits of the debt. Oladehin highlighted the necessity of evaluating whether the borrowed funds are being invested in productive ventures or used to cover recurrent expenses like salaries. He indicated that Nigeria's current economic challenges, compounded by external factors, may lead to continued reliance on borrowing to fund budget deficits. However, he cautioned that the structure of Nigeria's debt may weaken in the short term, necessitating strategic decision-making to address fiscal imbalances and sustain economic stability. Despite the escalating debt service costs, Oladehin pointed out that relative progress has been made in reducing the proportion of revenues allocated to debt servicing. He commended the government's efforts in enhancing revenue generation and advised on the importance of considering historical trends and comparative analysis when evaluating debt sustainability. Regarding the foreign exchange market, Oladehin underscored the vulnerability of Nigeria to external shocks, such as geopolitical tensions affecting oil prices. He highlighted the necessity for the government to bolster fiscal discipline to navigate challenging economic conditions and mitigate currency depreciation risks. The injection of funds into the FX market signifies proactive measures to stabilize the Naira amidst market volatility. Discussing the disparity in debt levels among Nigerian states, Oladehin emphasized the significance of debt-to-GDP and debt-to-revenue ratios in assessing the sustainability of state debts. He explained that states with higher revenue-generating capacity, like Lagos, have greater flexibility in raising debt compared to states dependent on federal allocations. Oladehin raised concerns about transparency and accountability in state budget management, noting that these factors influence investor confidence and risk perception. In conclusion, the surge in Nigeria's public debt reflects the complex economic landscape, requiring a nuanced approach to debt management and fiscal policy. Stakeholders must prioritize sustainable borrowing practices, transparency, and accountability to navigate challenges and capitalize on opportunities for economic growth.