Why the Evolving Composition of Nigeria’s Public Debt Raises Concerns — Experts

Why the Evolving Composition of Nigeria's Public Debt Raises Concerns — Experts

The recent report on Nigeria’s public debt has raised concerns among some financial analysts despite a slower growth in the debt burden. According to the Debt Management Office (DMO), Nigeria’s public debt reached N87.91 trillion or $114.25 billion by the end of the third quarter of 2023, a modest 0.6 percent increase from the previous quarter’s figure of N87.38 trillion.

The data reveals a shift in the government’s focus towards domestic borrowing, downplaying foreign borrowing. Some financial analysts interviewed by Vanguard indicated that this strategy change may yield negative economic results.


Okiki Oladipo, a Senior Analyst at Parthian Partners, a Lagos-based investment house, explained that the sustained increase in interest rates across advanced economies made local borrowing more affordable. This, he noted, explains the significant contribution of domestic debt to the public debt in Q3 2023. Oladipo also pointed out that the repayment of a $500 million Eurobond in July contributed to the decline in foreign currency debt.

Analysts, including those from HIIGHCAP Securities Limited, emphasized the necessity of debt to support the economy. They suggested that if reforms continue at their current momentum and economic development focuses on utilizing domestic resources for infrastructure and industrial development, the winding down of both domestic and foreign debt could be sustainable.


Prof Uche Uwaleke, President of the Association of Capital Market Academics of Nigeria (ACMAN), expressed concern about the composition of the outstanding domestic debt, mostly in Federal Government of Nigeria (FGN) bonds, accounting for over 80 percent. He recommended that future domestic borrowings prioritize infrastructure bonds like Sukuk and Green Bonds, which are tied to specific projects.

Clifford Egbomeade, an Analyst and Public Relations/Communications Adviser at ID Africa, highlighted the nuanced aspects of the situation. He acknowledged the positive aspect of the decrease in external debt as a move away from foreign reliance but cautioned that an increase in domestic debt should be analyzed carefully. Egbomeade stressed the importance of ensuring that domestic borrowing contributes to productive investments for sustainable economic growth, avoiding over-indebtedness.


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