Naira devaluation raised Nigeria’s external debt by about N30.03tn between 2023 and June 2024 when considered in naira terms, an analysis by The PUNCH showed.
Despite a reduction in the country’s debt when measured in US dollars, the exchange rate shift has made Nigeria’s foreign obligations far more costly in local currency.
Data from the Debt Management Office shows that as of June 1, 2023, Nigeria’s external debt stood at $43.16bn.
At an exchange rate of N770.38 to the dollar, this amounted to N33.25tn. However, by June 1, 2024, the naira had depreciated by 47.6 per cent, with the exchange rate rising to N1,470.19 to the dollar.
As a result, Nigeria’s external debt, which has dropped to $42.90bn, is now equivalent to N63.07tn.
In dollar terms, Nigeria’s external debt dropped by 0.60 per cent or $258.18m between June 2023 and the same month of 2024.
However, in naira terms, there was an increase of 89.7 per cent or N29.82tn within the same period.
The PUNCH further observed that if the June 2023 exchange rate (N770.38/$1) had been used, Nigeria’s external debt would have been N33.05tn.
This further shows that the naira devaluation added N30.02tn to Nigeria’s external debt in one year as the country battles currency weakness and rising total debt.
While the nominal value of Nigeria’s external debt in dollar terms has remained relatively stable, the depreciation of the local currency has caused a steep rise in the naira equivalent.
The PUNCH further observed that external debt accounted for 46.96 per cent of Nigeria’s total debt by June 2024, up from 38.05 per cent recorded in the same month last year.
Further analysis by The PUNCH showed that Multilateral lenders remain Nigeria’s largest external creditors, accounting for over half of the country’s external debt (50.41 per cent or $21.62bn) as of June 2024.
These creditors include the International Monetary Fund, the World Bank Group, the African Development Bank Group, and the Islamic Development Bank, among others.
Nigeria owes $1.61bn to the IMF, making up 3.75 per cent of the total external debt.
The World Bank’s share of Nigeria’s debt totals $16.32bn, with the majority owed to the International Development Association, which accounts for $16.32bn, which represents 38 per cent of Nigeria’s total external debt.
The International Bank for Reconstruction and Development, another arm of the World Bank, is owed $484.0m, or 1.13 per cent.
Nigeria’s debt to the AfDB group is $3.87bn, representing 9.03 per cent of the total external debt.
This includes $1.63bn to the African Development Bank and $991.89m to the African Development Fund.
Nigeria owes $4.97m to Arab Bank for Economic Development in Africa a negligible amount relative to the total, at 0.01 per cent.
Debt to the European Development Fund totals $30.72m, or 0.07 per cent of Nigeria’s external debt.
Nigeria’s debt to the IsDB stands at $241.84m, or 0.56 per cent of the total debt, while Nigeria’s debt to the International Fund for Agricultural Development is $273.51m, which is 0.64 per cent of the external debt stock.
Bilateral Creditors, such as China and France, have provided Nigeria with $5.89bn (13.72 per cent of total external debt) in credit financing.
China is Nigeria’s largest bilateral creditor, with $5.07bn owed to the Exim Bank of China, and this constitutes 11.83 per cent of the total external debt.
Nigeria owes $623.55m to France (Agence Française de Développement), or 1.45 per cent of the total external debt and $52.18m to Japan (Japan International Cooperation Agency), representing 0.12 per cent.
The country’s debt to India (Exim Bank of India) is $22.35m, or 0.05 per cent, and to Germany (Kreditanstalt für Wiederaufbau) $115.81m, or 0.27 per cent of total external debt.
Commercial creditors, primarily through Eurobonds, form a significant portion of Nigeria’s external debt.
Nigeria owes $15.12bn in Eurobonds, accounting for 35.24 per cent of the total external debt.
The Eurobond debt is expected to increase by the end of the year, as Nigeria recently raised $2.2bn from its latest Eurobond auction.
Nigeria also has smaller debts to various syndicated loans and financial institutions. For instance, $270m, or 0.63 per cent of the total external debt, is owed to a syndicate of banks.
The PUNCH earlier reported that Nigeria’s external debt might rise to $45.1bn by the end of 2024 as the Federal Government planned to secure additional external funding.
The Debt Management Office revealed in its latest report that the country’s external debt stock increased by $780m in the second quarter of 2024, growing from $42.12bn in March to $42.9bn as of June 2024.
In a related development, the Federal Executive Council approved a $2.2bn external borrowing plan as part of the Federal Government’s 2024 Appropriation Act financing programme.
Although the borrowing plan included a combination of Eurobond and Sukuk offerings, valued at $1.7bn and $500m, Nigeria has raised the entire $2.2bn from its latest Eurobond auction out of over $9bn subscriptions.
Justifying the borrowing, the Minister of Finance, Wale Edun, said the external financing initiative aligned with the administration’s broader economic recovery plan, which focused on stabilising macroeconomic conditions, adjusting market pricing for foreign exchange and petroleum products, and supporting local production.
He added that earlier in the year Nigeria’s successful domestic issuance of dollar bonds highlighted the growing resilience and sophistication of the country’s financial market, attracting both local and international investors who showcased confidence in the Federal Government’s economic reform agenda.
The PUNCH earlier reported that the Federal Government spent $3.58bn servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.
This was according to data from the Central Bank of Nigeria on international payment statistics.
The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.
The World Bank, in its latest International Debt Report, revealed that developing nations spent an unprecedented $1.4tn on foreign debt servicing in 2023, driven by a surge in interest rates to their highest levels in 20 years,
Interest payments alone reached $406bn, a nearly 30 per cent increase from the previous year, severely impacting spending in critical sectors such as health, education, and environmental programs.
According to the report, the most vulnerable economies, those eligible for loans from the World Bank’s International Development Association, bore the brunt of the financial strain.