Victor EzejaThere are concerns that Nigeria’s external debt could reach $45.1 billion by the end of 2024 following the Federal Government’s plans to obtain more foreign loans, leading to an impending debt crisis.
President Bola Tinubu on Tuesday sent a letter to the National Assembly requesting the approval of a fresh N1.767 trillion (equivalent to $2.2 billion at the Budget Exchange Rate of USD1.00/N800) as a new external borrowing plan to finance the 2024 Appropriation Act.
Join our WhatsApp ChannelThe president’s request was read by the Speaker of the House of Representatives, Tajudeen Abbass, during plenary on Tuesday.
According to the president, the loan which is based on an exchange rate of N800 to $1, will if approved, be used to partly finance the deficit of N9.7 trillion in the 2024 budget.
The president had also sent the 2025- 2027 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) to the Senate for consideration and approval.
Recall that the Federal Executive Council (FEC), had last Thursday approved a $2.2 billion external borrowing plan as part of the Federal Government’s 2024 Appropriation Act to support the financing of the administration’s economic reform programmes.
This comes as a recent report by the Debt Management Office (DMO), revealed that Nigeria’s external debt stock increased by $780 million in the second quarter of 2024 from $42.12 billion in March to $42.9 billion by June 2024.
This means that an additional $2.2 billion fresh borrowing plan will increase Nigeria’s external debt to $45.1 billion by the end of 2024.
Debt Servicing Cost
As contained in the MTEF & FSP 2025-2027, the cost of servicing Nigeria’s foreign debt has surged by 107.7 per cent to N3.8 trillion, This has significantly exceeded the projections outlined in the 2024 budget between January and August. It is almost 40 per cent surge from 2023, reflecting the impact of naira devaluation.
The burden of external debt has been exacerbated by the devaluation of the naira, which has increased the cost of local currency.
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The 2024 budget had projected foreign debt servicing costs at N1.83 trillion, however, actual spending increased by N1.97 trillion to N3.8 trillion during the same time frame.
N7.41 trillion was allotted for debt servicing during the period, which included interest on FGN bonds for securitised ways and means, sinking funds, and foreign and domestic debt.
The government has already paid N5.51 trillion which is 34.4% of the entire sum budgeted for it. As debt servicing continues to account for a sizeable amount of government spending, this demonstrates the increasing strain on public finances.
Nigeria’s national debt has grown dramatically under President Bola Tinubu’s leadership, reaching concerning heights as of 2024. Nigeria’s total national debt increased from N87.3 trillion in June 2023 to N134.2 trillion in June 2024, according to data published by DMO. This amounts to a record N46.9 trillion rise.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
