Nigeria’s debt-to-GDP ratio ramped up to 55% by June 2024, a significant jump from 42.4% in December 2023 reflecting a combination of exchange rate depreciation and increased domestic borrowing at higher interest rates. The data comes from the Debt Management Office (DMO).
Key Debt Figures
External Debt: $42.9 billion
Domestic Debt: ₦71.2 trillion
Total Public Debt: ₦135.6 trillion (using the exchange rate of ₦1,505/$1 as of June 30, 2024)
What is the Debt-to-GDP Ratio?
The debt-to-GDP ratio, a critical indicator for assessing fiscal health, public investment capacity, and a country’s ability to access affordable financing, measures how much a country owes compared to the size of its economy (Gross Domestic Product).
Nigeria’s GDP for the trailing four quarters ending June 30, 2024, stood at ₦246.3 trillion, resulting in the 55% debt-to-GDP ratio, up from 42.4% in December 2023, when total public debt was ₦97.4 trillion, including $42.4 billion in external debt and ₦59.1 trillion in domestic debt. These are very large numbers.
Comparison with Other African Nations
Nigeria’s debt-to-GDP ratio, despite its increase, is still lower than:
Ghana: 82.9%
South Africa: 72%
Kenya: 70%
However, Nigeria faces a unique challenge: its high debt service-to-revenue ratio, which makes it difficult to meet debt repayment obligations.
Rising Debt Servicing Costs
Between January and September 2024, Nigeria’s debt service payments surged by 39.77%, rising from $2.56 billion in 2023 to $3.58 billion during the same period in 2024. In June 2024 alone, 73.97% of foreign payments (about $757.41 million) went toward servicing debt.
This increase places a significant strain on public resources and limits funds available for other national priorities.
Government’s Budget Plans
The federal government has proposed a ₦47.9 trillion budget for 2025, based on its medium-term expenditure framework aiming to borrow ₦9.2 trillion to cover the budget deficit, so as to finance this budget.
What Does This Mean for Nigeria?
The rising debt-to-GDP ratio shows that Nigeria’s financial health is under pressure even though it is still better than some African countries, the growing reliance on borrowing and the heavy cost of servicing debt could undermine long-term development goals.
Experts warn that high debt levels make Nigeria more vulnerable to external shocks, such as currency fluctuations or changes in global economic conditions, hence, addressing the high debt service-to-revenue ratio remains critical for ensuring sustainable growth.
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