Nigeria’s public debt has risen to N87.38 trillion in the second quarter of 2023, with additional debt from “Ways and Means” measures. The country’s external debt stands at $38.8 billion, heightening the risk of a debt overhang if the Naira continues to depreciate. This overhang occurs when a country’s debt burden becomes unsustainable, leading to challenges in servicing the obligation. The increase in debt is attributed to factors including FX devaluation, new borrowings, and the inclusion of securitized debt in local figures. Analysts call for measures to curb fiscal crisis, including addressing crude oil theft and right-sizing expenditure.
Key Points:
- Nigeria’s total public debt in dollars rose 4.7% quarter-on-quarter to $113.4 billion, while the Naira equivalent surged by 75.3% to N87.38 trillion.
- The Federal Government’s share of the debt at the end of Q2 was 89.5%, a significant increase from the previous year-end.
- The Naira devaluation in Q2 had a significant negative pass-through effect on the Federal Government’s external debt component.
- Nigeria faces challenges in Debt-to-GDP, Debt service-to-revenue, and fiscal deficit as a percentage of GDP.
- Macroeconomic indicators like inflation, exchange rates, crude oil output, FX reserves, and foreign capital inflows are at their lowest points in a decade.
- Analysts call for actions to curb crude oil theft, enhance security, right-size recurrent expenditure, and streamline bureaucratic processes.
Analysis: The surge in Nigeria’s public debt, coupled with challenges in various economic indicators, signals a looming fiscal crisis. The risk of a debt overhang is amplified by factors such as Naira depreciation and increased external debt. Addressing these issues will be crucial for stabilizing the country’s fiscal situation and ensuring sustainable economic growth.
Background: Nigeria’s rising public debt and economic challenges pose significant concerns for the country’s financial stability. Efforts to manage debt levels and implement effective economic policies will play a crucial role in addressing these issues. (Published by Market News Nigeria)