Public debt stock may hit N130tn by Dec – Report

 

N igeria’s public debt stock is projected to hit N130 trillion by the end of 2024, according to a recent report by Afrinvest, titled ‘Bank Recapitalisation, Catalyst for a $1tn Economy’. The report, unveiled in Abuja, highlights significant concerns regarding the country’s debt-to-GDP ratio and fiscal sustainability.

Current Debt Status:

• Q1 2024 Figures: Nigeria’s public debt stood at N121.7 trillion, comprising N77.5 trillion in domestic debt and N44.2 trillion in external debt.
  • Domestic Debt: Includes N44.8 trillion in Federal Government bonds, N20.3 trillion in Treasury bills, and N12.4 trillion in other domestic debt.
  • External Debt: Includes N14.3 trillion from multilateral creditors, N10.9 trillion from bilateral creditors, and N19.0 trillion from commercial creditors.

Debt Projections for 2024:

• Fiscal Deficit: Estimated to exceed N13 trillion.
• Total Public Debt Stock: Expected to surpass N130 trillion.
• Debt-to-GDP Ratio: Projected to be around 55%.
• Debt Servicing-to-Revenue Rate: Anticipated to exceed 60%.

Report Insights:

Afrinvest's report criticizes the 2024 budget for being based on overly optimistic revenue assumptions, particularly the projected 43.9% revenue share from oil and minerals, which they deem unrealistic. The 2023 budget also underperformed, with actual revenue falling short of the budgeted amount despite an increase in aggregate expenditure by 31.8% to N18.8 trillion, leading to a higher deficit of N46.9 trillion.

Impact on Banking Sector:

The expansive borrowing plan of the Federal Government could negatively impact banks' deposit bases, as attractive yields on government securities may draw funds away from traditional bank deposits. Afrinvest also warns of heightened risks of asset deterioration due to the consumption-focused budgetary patterns.

Forex Market and Recommendations:

Afrinvest commended the Central Bank of Nigeria (CBN) for streamlining Bureau De Change (BDC) operations and consolidating forex segments, but noted ongoing challenges with forex reserves. The report suggests exploring alternative forex sources such as bilateral loans, natural resource-tied loans, debt-for-nature swaps, and asset concessions for short-term relief.