I reviewed the just-released Q1 2024 Total Public Debt Portfolio for Nigeria in this article. Nigeria classifies its debt into two main broad categories: Foreign and Local Debt.

I will review the total debt amount, then the breakdown into foreign and local debt, and finally, the sustainability of the debt.

In this piece, I will use the USD currency to avoid comparing numbers using pre- and post-Naira devaluation figures.

As of March 31, 2024, Nigeria’s total debt is $91.46 billion, which includes both local and foreign debt. A year ago, the debt was $108 billion.

If we track from when the administration of President Bola Tinubu came into office, the total debt as of June 2023 was $113 billion. So, Nigeria’s total outstanding debt has decreased from any perspective.

Let’s go further and explore the breakdown of foreign and local debt. Foreign debt denominated in USD is always a focal point because Nigeria can’t print dollars to repay obligations. Foreign debt costs for Nigeria are spread across an expansive interest range.

For instance, while Nigeria has bilateral loans below 3% from China, the Nigerian Eurobonds offer coupons from 5.15% to 9.24% APR.

Looking at March 2024 numbers, the good news is that the foreign debt is down from $43.67 billion to $42.11 billion. If we track from the start of the Bola Tinubu presidency, it was $43.15 billion; again, we see a fall in total numbers.

This fall in external debt in March 2024 is driven by repayments to the IMF ($409 million) and the International Development Association ($165 million). Nigeria repaid a total principal of $641 million and interest of $430 million to its lenders.

The domestic debt is also down. I am not sure why domestic debt is denominated in USD, but in USD terms, it’s down from $65.62 billion in March 2023 to $49.34 billion in March 2024. Again, in June 2023, when President Bola Tinubu took office, it was $70.26 billion.

So, we see domestic debt has decreased compared to a year ago when President Bola Tinubu took over.

The concern with Nigerian debt is always sustainability; can Nigeria repay its obligations on time? The actual costs come when you look at the cost of this debt.

The foreign bonds, specifically the Eurobonds, alone cost Nigeria $282.5 million in interest, not principal, from January to March 2024. The total payment made by Nigeria from January to March 2024 is $1.11 billion. In the same period last year, the figure was $801.36 million.

So, while the outstanding loan amount for the foreign debt is down year-on-year, the external debt cost is up year-on-year. This is because the interest cost to borrow for Nigeria has risen as global rates have risen.

For domestic debt, the cost from January to March 2024 is N989.24 billion. A year ago, it was N874.12 billion. Again, while the outstanding number is down, the cost to service the domestic loan is also up year-on-year, reflecting the rise in interest costs driven by the increase in monetary policy rates.

The summary is this: The cost of servicing the foreign and domestic debt is rising. Higher local and foreign interest rates drive this rise.

The federation needs to boost revenues to repay debt and close the deficit financing gap. A considerable risk remains that oil prices recede, revenues fall, and the deficit blows up.

The best-case scenario is to see oil prices rise and the government expenses on PMS subsidy fall, releasing more government revenues to repay outstanding debt, especially the foreign-denominated debt.

All numbers are sourced from published reports from the Debt Management Office of Nigeria.