…Naira Depreciation, Massive Borrowing Raise Debt By 904% To N122tn
Nigeria’s public debt under the ruling All Progressive Congress (APC) rose by 903.9 per cent to an all-time high of N121.67tn ($91.46bn) as of March 31, 2024, from N12.1tn ($63.8bn) inherited from the Peoples’ Democratic Party (PDP), an analysis conducted by NewsNGR of the country’s debt profile has revealed.
The analysis covered a period of nine years from June 2015 to March 2024.
Former President Goodluck Jonathan handed over to APC’s Muhammadu Buhari on May 29, 2015, with a total public debt profile of N12.1tn or an equivalent of $63.8bn at the exchange rate of N196.95 per dollar, debt records of the Debt Management Office (DMO) reveal.
Buhari won the 2015 presidential election with a stylish slogan of ‘change’ and an anti-corruption campaign which he told voters would save the country from economic quagmire and secure the future of youths.
A breakdown of the debt profile as of June 2015 which was a month after Buhari took over showed that external debt stock for the federal and state government was N2tn which is $10.31bn.
In this period, domestic debt owed by the FG was $42.73bn or N8.39tn, making a total of $52.95tn or N10.42tn.
The domestic debt incurred by states as of June 2015 stood at $10.85bn which equals N1.69tn at the prevailing exchange rate of N196.95 per dollar.
By June 2016, total public debt under Buhari’s administration rose to N16.29tn ($61.4bn) after the naira began a steady depreciation from N196.95 per dollar to N283 per dollar.
The DMO records showed that external debt grew to N3.2tn or $11.26bn while domestic debt taken by the federal government fell from $42.7bn to $37.47bn but the naira equivalent rose to N10.6bn due to currency depreciation issue.
The domestic debt of states rose from $10.85bn or N1.69tn to $12.7bn or N2.5tn by June 2016.
Nigeria’s debt profile worsened by June 2017 rising to $64.19bn in dollar terms and N19.64tn. The rise in debt was driven by $15.04bn (N4.6bn) external borrowings and $39.34bn (N12.03tn) domestic debt stocks.
But states’ domestic debt fell to $9.8bn while the naira equivalent rose to N3tn from N2.5tn in 2016.
In Buhari’s second year in office, Nigeria’s total public debt rose to $73bn or N22.37bn in June 2017, up from $64.19bn or N19.64tn in 2017.
In June 2018, external debt rose to $22.08bn or N6.75tn while domestic debt rose to $39.75bn or N12.15tn. Also, the domestic debt of states rose to $11.37bn or N3.47tn during the period. This dragged total public debt to $73.2bn or N22.38tn.
Buhari’s government struggled further in 2019 with debt as borrowing increased total debt to $83.9bn or N25.7tn from $73.2bn or N22.38tn by the end of June 2019.
Further analysis showed that external borrowing surged to $27.16bn or N8.32tn while total domestic debt increased to $56.7bn, equivalent to N17.4tn based on an official exchange rate of N306.40 per dollar.
When COVID-19 struck in 2020, government borrowing rose to $85.89bn (N31tn) in June 2020. A breakdown of this amount showed that external debt rose to $31.47bn or N11.36tn while total domestic debt grew to $54.4bn or N19.65tn in June 2020. The exchange rate also rose to N361 per dollar.
In June 2021, Nigeria’s debt rose marginally to $86.57bn which equals N35.46tn driven by a rise in total external debt from $31.47bn or N11.36tn in June 2020 to $33.47bn (N13.7tn) in June 2021.
But total domestic debt rose in naira term from $54.4bn (N19.65tn) in June 2020 to $53.1bn or N21.75tn in June 2021.
In June 2022, former president Buhari took an extra $16.73bn including interest which pushed total debt to $103.3bn or N42.84tn.
The data provided by the DMO showed that during the period, external debt hit a record N40.1bn or N16.6tn while domestic debt rose to $63.24bn (N26.2tn) in June that year. The exchange rate also depreciated to N414.72 per dollar.
Tinubu Inherited N87.37tn Debt, Added N34trn In Nine Months
Buhari handed over to the winner of the 2023 presidential election, Bola Tinubu on May 29, 2023, but he left a total public debt of N87.37tn or $113.4bn according to DMO debt report as of the end of June the same year.
Tinubu who won under the APC also inherited from his predecessor a total external debt of $43.15bn (N33.24tn) and a total domestic debt of $70.26bn or N54.13tn.
President Tinubu floated the naira as part of his economic reforms which widened the exchange rate from N414.72 to N770.38 per dollar in June 2023.
Tinubu blamed his successor for the country’s huge debts. However, his government took the debt profile to N97.34tn ($108.2bn) by December 2023 which was due to another depreciation of the naira leading to N899.39 per dollar.
Tinubu’s administration took the total public debt higher by N34.3tn (39.2 per cent) from N87.37tn or $113.4bn which he inherited from Buhar in June 2023 to N121.67tn ($91.46bn) in March 2024. This was driven by the rise in exchange rate to N1,330.26 per dollar.
Analysts Raise Alarm Over Heavy Borrowing Under APC
Some financial analysts have raised concerns about Nigeria’s growing debt, emphasizing that the government has relied too heavily on loans instead of addressing revenue inefficiencies.
The analysts argue that much of the borrowed funds have not been effectively used for capital projects, and there is a need for debt restructuring or forgiveness.
They noted that borrowing by the All Progressives Congress (APC) led administration from 2015 to the present has placed the Nigerian economy in a debt trap.
The experts stated this in an exclusive interview with NewsNGR while discussing Nigeria’s total debt profile. They said sustainable revenue-boosting measures and better financial management are crucial to avoid further economic deterioration.
Analyst and Head of Research at FSL Securities Limited, Mr. Victor Chiazor expressed concerns about the government’s long-standing reliance on both domestic and foreign loans to fund fiscal deficits.
According to Chiazor, this approach has been favored over more sustainable strategies such as increasing government revenues, eliminating inefficiencies, and reducing the government’s high wage bill.
He emphasized that these alternatives would have been a far better solution to address revenue shortfalls rather than continuing to accumulate debt.
Chiazor acknowledged the significant rise in Nigeria’s debt levels since the current administration assumed power. However, he pointed out that much of this increase is tied to the depreciation of the Naira.
The weakening of the currency has caused a sharp rise in the total Naira-denominated debt, particularly when dollar obligations are converted into local currency.
Interestingly, Chiazor noted that the impact of this debt surge could have been less severe, as the government earns a large portion of its revenues in dollars.
“The devaluation of the Naira has increased the local currency value of these revenues. Yet, despite this potential cushion, the government’s persistent appetite for borrowing has not been matched by corresponding impact of these loans on capital projects.
“Additionally, there appears to be no solid plan in place to significantly improve government revenues,” he said.
He concluded that Nigeria’s current debt levels are unjustifiable and called for a strategic shift in focus.
Chiazor stressed the need to boost government revenues, close financial leakages, and reduce the high wage bill. He also recommended that loans should primarily be directed towards capital expenditures rather than being used to fund recurrent expenses.
The Group Managing Director of Crane Securities Limited, Mr. Mike Eze, also expressed worry on the government’s heavy reliance on loans to fund projects.
From an economic standpoint, Eze argued that there is little justification for the significant borrowing under the All Progressives Congress (APC) administration.
He noted that most of the major projects undertaken by the government have been financed through loans.
Eze noted while some politicians might defend the loans by pointing to key infrastructure projects such as coastal roads, as well as roads in Badagry, Sokoto, and Kano, these projects collectively run into trillions of naira.
Despite the scale of these investments, Eze believed that, economically, the borrowing is unjustifiable given the current state of the economy.
He emphasized that the country cannot continue to accumulate more debt without carefully considering how to address its growing debt profile.
Eze further pointed out that instead of focusing on taking on new loans, the government has resorted to negotiations with donor nations and multilateral financial institutions like the World Bank to restructure the country’s existing debt.
He stressed that the focus should be on finding solutions to manage and pay off the current debt, rather than increasing the debt burden.
Eze also recommended exploring options like debt restructuring or even debt forgiveness, similar to what was pursued under the previous administration of the People’s Democratic Party (PDP).
He emphasized that this might be the only viable solution, as Nigeria cannot continue on its current borrowing trajectory.
He concluded by noting that Nigeria has been fortunate not to have its credit rating downgraded by international organizations, likely due to the country’s foreign reserves, which remain relatively stable.
However, he warned that the situation could change if the government does not take proactive steps to manage its debt.
The Executive Vice Chairman of Hicap Securities Limited, Mr. David Adonri, also raised concern over the significant borrowing by the All Progressives Congress (APC) led administration from 2015 to the present, stating that it has placed the Nigerian economy in a debt trap.
According to Adonri, the country now faces a situation where new debt is needed to meet existing financial obligations, in order to avoid a potential sovereign default.
He noted that much of the borrowed funds were used to finance consumption, including subsidies on energy and currency, and, in some cases, lost to mismanagement and embezzlement.
“The funds were not deployed to create wealth or generate productive employment,” Mr. Adonri stated.
The President of the New Dimension Shareholders Association (NDSA), Mr. Patrick Ajudua, emphasized that the real issue lies in how the borrowed funds have been utilized.
“The critical question is whether the debt is being used for infrastructural growth or merely for recurrent expenditure,” he said.
He pointed out that while a portion of the debt has been allocated for infrastructure development, many projects have been abandoned due to corruption, defeating their intended purpose.
“In my view, much of the debt is unjustified and has worsened the country’s economic state and development,” Ajudua concluded.
He urged the government to pursue debt forgiveness and restructuring as a matter of urgency to address the growing economic challenges.
Nothing To Show For Loans Taken By APC Administrations -Zikirullahi,
Speaking with NewsNGR, Executive Director of the Resource Centre for Human Rights and Civic Education, CHRICED, Comrade Ibrahim Zikirullahi, stressed that there is nothing to show for the loans taken by the APC administration.
He equally noted that the loans are not taken in the interest of Nigerians.
Zikirullahi who described the APC as an ‘unproductive party’, warned that Nigeria will not make any progress if the federal government continues with its current policies.
He said, “The APC has proven time and time again that it is not a productive party, all they do is look for money to borrow and share because for all the money borrowed so far, there is nothing to show for it.
“We still have accidents due to bad roads, our education is still in shambles, our hospitals are still like consulting clinics, unemployment is rising, there is inflation everywhere, there is no industry that is being created or being revived that you could say in years to come we should be able to pay those debts.
“And it is so unfortunate that the Senate themselves only look at their own considerations in approving those loans. It is not about the interest of the Nigerian people and whether we like it or not, they accumulate these debts and at the end of the day, they retire abroad to go and enjoy when they get out of office. Then the upcoming youths will suffer it.
“We have already seen what it going on, that is why in most cases now, government policies are based on Bretton Woods dictates. There is nothing we do now without the influence of the IMF and the World Bank.
“As long as we continue in this trend and we are not ready to toe the path of production, we will continue to be in a vicious circle which, at the end of the day, nothing good will come out of it.”