President Tinubu Seeks N1.77tn in New Borrowings
President Bola Tinubu has submitted a request to the National Assembly for approval of a fresh N1.767 trillion as part of a new external borrowing plan included in the 2024 appropriation act. If granted, the loan will help finance the projected budget deficit of N9.7 trillion for the 2024 budget.
The president’s request was presented by the speaker during a plenary session on Tuesday. In addition, he has forwarded the Medium-Term Expenditure Framework (MTEF) for 2024-2027 to the parliament, along with the National Social Investment Programme establishment amendment bill. This amendment aims to make the social register the primary tool for implementing the federal government’s social welfare programs.
Recently, the Central Bank of Nigeria reported that the federal government spent $3.58 billion servicing the country’s foreign debt in the first nine months of 2024. This figure represents a 39.77 percent increase compared to the $2.56 billion spent during the same period in 2023.
The report highlights that the highest monthly debt servicing payment in 2024 occurred in May, totaling $854.37 million, while the highest expenditure in 2023 was $641.70 million in July. The trend in international debt servicing by the CBN underscores the escalating cost of Nigeria’s debt obligations.
A breakdown of the international debt figures shows that in January 2024, debt servicing costs surged by 398.89 percent, jumping to $560.52 million from $112.35 million in January 2023. February experienced a slight decline of 1.84 percent, with payments falling from $288.54 million in 2023 to $283.22 million in 2024.
March recorded a 31.04 percent decrease in payments, down to $276.17 million from $400.47 million in the same period last year. April saw a significant increase of 131.77 percent, with $215.20 million paid in 2024 compared to $92.85 million in 2023. May 2024’s debt servicing payment reached a peak of $854.37 million, a 286.52 percent increase from $221.05 million in May 2023. June noted a small decline of 6.51 percent, with $50.82 million paid in 2024, down from $54.36 million in 2023.
In July 2024, there was a 15.48 percent decrease, with payments dropping to $542.50 million from $641.70 million in July 2023, followed by another decline of 9.69 percent in August, where $279.95 million was paid compared to $309.96 million in 2023. However, September 2024 experienced a 17.49 percent increase, with payments rising to $515.81 million from $439.06 million in the same month the previous year.
Given the rising exchange rates, this data raises concerns about the growing pressure of Nigeria’s foreign debt obligations.
On Monday, reports indicated a rise in the debts of the 36 states within the federation, which totaled N11.47 trillion as of June 30, 2024. This marks a 14.57 percent increase from the N10.01 trillion recorded in December 2023, despite allocations by the Federal Accounts Allocation Committee (FAAC) and the states’ internally generated revenues (IGR).
According to data from the Debt Management Office (DMO), external debt for the states and the Federal Capital Territory rose from $4.61 billion to $4.89 billion during the review period. In naira terms, the debts increased by 73.46 percent, rising from N4.15 trillion to N7.2 trillion, following the naira’s devaluation from approximately N776.39/$1 in December 2023 to N1,470.19/$1 by June 2024. Conversely, domestic debt for the states and the FCT declined from N5.86 trillion to N4.27 trillion.
In total, the states and the FCT accounted for Nigeria’s public debt of N44.3 trillion in June 2024, a slight decrease from their 10.29 percent share in December 2023 despite an increase in nominal debt levels. The sub-national governments have been grappling with a persistent reliance on borrowing to finance their budgets, as the total debt stock of the 36 states surged by 38.1 percent, from N7.25 trillion in 2022 to N10.01 trillion by the end of 2023.
According to BudgIT’s 2024 State of States report released on Tuesday, this debt growth was partly driven by a N1.12 billion increase in domestic debt, resulting in an average year-on-year growth rate of 11.4% by December 31, 2023, with total domestic debt standing at N5.86 trillion. The rise in foreign debt also persisted, increasing by 4.1 percent, from $4.43 billion in 2022 to $4.61 billion in 2023.
The report indicates that the liberalization of the exchange rate has exacerbated the financial strain on states, significantly raising their foreign loan repayment obligations in naira terms. Notably, Lagos State continues to be the most indebted in foreign currency, accounting for 26.9 percent of the total foreign debt, equivalent to $1.24 billion.
The DMO’s report follows BudgIT’s assertion that 32 states relied on FAAC for at least 55 percent of their total revenue in 2023. The 2024 report sheds light on the over-reliance of state governments on federally distributable revenue, highlighting their vulnerability to fluctuations in crude oil prices and other external shocks. The report further states that 14 states depended on FAAC receipts for at least 70 percent of their total revenue.
