DMO Explains Factors Behind Nigeria’s Rising Debt Stock

The Debt Management Office (DMO) has provided insight into the recent increase in Nigeria’s debt stock, citing approved new borrowings and fluctuations in the naira exchange rate as the primary contributors.

In a statement released yesterday, the DMO explained that the growth in debt was due to authorized new external and domestic borrowing, along with the securitization of the Ways and Means Advances. These steps, according to the DMO, aim to attract foreign exchange inflows, bolster external reserves, and support the naira.

Addressing the changes in total debt data between the fourth quarter of 2023 (Q4 2023) and the first quarter of 2024 (Q1 2024), the DMO explained that the N24.33 trillion increase in naira terms has been misinterpreted as new borrowing. The actual new borrowing includes N2.81 trillion from the new domestic borrowing of N6.06 trillion outlined in the 2024 Appropriation Act and N4.90 trillion from the securitization of the N7.3 trillion Ways and Means Advances approved by the National Assembly.

The depreciation of the naira’s exchange rate, from USD/N899.39 in Q4 2023 to USD/N1,330.26 in Q1 2024, significantly affected the valuation of the debt stock in naira terms.

Despite the perceived sharp increase in total debt stock, the DMO clarified that the total external debt stock remained relatively stable, decreasing slightly from USD42.50 billion in Q4 2023 to USD42.12 billion in Q1 2024. However, the naira valuation of this debt increased from N38.22 trillion to N56.02 trillion due to the exchange rate depreciation, which accounts for the N24.33 trillion rise in the total debt stock for Q1 2024.

In US dollar terms, the total debt stock actually declined from USD97.34 billion in Q4 2023 to USD91.46 billion in Q1 2024, illustrating the impact of exchange rate changes on debt valuation.

As of March 31, 2024 (Q1 2024), Nigeria’s total public debt in naira terms stood at N121.67 trillion, up from N97.34 trillion as of December 31, 2023 (Q4 2023). This figure includes the domestic and external debt of the thirty-six states and the Federal Capital Territory.