As of June 2024, Nigeria’s external debt has risen to a staggering $42.9 billion, according to the latest report from the Debt Management Office (DMO). This marks a notable increase from the $42.12 billion recorded in March 2024.
While the bulk of this debt is attributed to the Federal Government, Nigerian states and the Federal Capital Territory (FCT) also carry a significant portion of the burden. The combined external debt of the 36 states and the FCT accounts for approximately 11% of the total, amounting to $4.89 billion.
The external debt is composed of several different types of loans:
- Multilateral Debt: $17.13 billion, which includes loans from international financial institutions.
- Bilateral Debt: $5.49 billion, including loans from countries and organizations such as China, the EXIM Bank, JICA (Japan International Cooperation Agency), KFW (German Development Bank), IsDB (Islamic Development Bank), and AFD (French Development Agency).
- Commercial Debt: $15.12 billion, which includes Eurobonds and diaspora bonds issued by Nigeria to international investors.
Despite a relatively stable external debt level, with only a slight increase of $780 million from March 2024 to June 2024, the financial obligations remain significant. The growing debt raises important questions about the sustainability of Nigeria’s borrowing strategy and its impact on the nation’s economy.
When examining the debt of individual states, it becomes clear that some states are heavily reliant on borrowing to meet their financial needs. Lagos State, Nigeria’s commercial capital, leads the pack with a debt of $1.2 billion, followed by Kaduna State with $640.99 million, and Edo State with $380.97 million.
Interestingly, states such as Jigawa, Ondo, and Kebbi have made efforts to reduce their debt stocks. Jigawa, for example, decreased its debt by over N254 million, from N2.1 billion in March 2024 to N1.82 billion in June 2024. Ondo and Kebbi also saw reductions in their domestic debts by approximately N1.3 billion and N1.6 billion, respectively.
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In contrast, many other states have seen their debt levels rise significantly over the same period. For instance, Lagos increased its domestic debt by N43.42 billion, from N929.41 billion in March to N885.99 billion in June. Rivers State also saw a major jump in debt, from N232.58 billion to N389.2 billion over the three-month period.
In addition to external borrowing, Nigeria’s states have also accumulated substantial domestic debt. As of June 2024, the total domestic debt owed by the 36 states and the FCT stood at N4.27 trillion, a marked increase from the previous figure of N4.07 trillion in March. This represents a 5% increase in just three months.
The highest domestic debt burden is carried by Lagos State, with N885.99 billion in domestic obligations, followed by Rivers with N389.2 billion and Delta with N304.54 billion. Some states, like Delta, have managed to reduce their domestic debt slightly, with a 9% decrease from N334.9 billion to N304.54 billion over the same period.
However, other states, such as Taraba and Niger, have seen alarming increases in their domestic debt profiles. Taraba’s debt rose by N52.64 billion, from N32.64 billion in March to N84.72 billion in June. Niger State’s debt surged by 70%, from N86.07 billion to N146.29 billion.
The Federation Account Allocation Committee (FAAC) plays a critical role in Nigeria’s fiscal distribution. In March 2024, a total of N1.12 trillion was allocated to the three tiers of government.
The Federal Government received N345.89 billion, while states received N398.69 billion, and local governments were allocated N288.69 billion. Additionally, oil-producing states were granted N90.124 billion as derivation funds.
In June 2024, the total FAAC allocation increased to N1.43 trillion, with N461.979 billion going to the states. However, despite this increase in funding, many states continue to amass more debt, signaling a deeper underlying financial strain. The growing reliance on borrowing—both external and domestic—raises concerns about long-term sustainability and the financial health of state governments.
Nigeria’s rising external and domestic debts point to a broader fiscal challenge. While the Federal Government holds the largest share of the external debt, the debt burden of the states, especially in the face of increasing allocations and revenues, highlights a troubling trend of financial mismanagement or the inability to generate sufficient revenue locally.
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Though some states are making efforts to reduce their debt, the overall increase in borrowing among others suggests that many state governments may be struggling to balance their books. The high borrowing trend, coupled with Nigeria’s inflationary pressures and exchange rate instability, further exacerbates the risks of rising debt servicing costs.
The path forward will require careful scrutiny of borrowing practices, more prudent fiscal management, and stronger revenue generation initiatives across the country. If left unchecked, Nigeria’s growing debt could place further strain on its economy, affecting public services, infrastructure development, and ultimately, the well-being of its citizens.