Market News

…could climb to 60% by 2027

Nigeria’s total public debt surged to 52.25% of GDP by the end of 2024, breaching the government’s own threshold of 40%, as naira depreciation, new borrowings, and the inclusion of previously off-balance sheet liabilities compounded fiscal pressures.

The figure, released in the Debt Management Office’s Medium-Term Debt Management Strategy (MTDS) 2024–2027, marks a sharp increase from the 40.57% ratio recorded in 2023, and nearly triples the 19% level reported in 2019.

According to the DMO, the key drivers of the increase include “higher levels of new borrowings, issuance of promissory notes, as well as the inclusion of N30 trillion Ways and Means Advances (WMAs) of the Central Bank of Nigeria (CBN) in the FGN’s domestic debt stock.” The office noted that although the 52.25% ratio exceeds Nigeria’s country-specific ceiling, it remains below the 70% benchmark set by the IMF’s Market Access Country Debt Sustainability Framework and the ECOWAS convergence criteria.

If current trends persist, however, DMO projects that he figure could approach 60% by 2027, raising further concerns about sustainability despite the government’s efforts to lengthen maturities and diversify funding sources.

The MTDS 2024-2027 outlines the federal government’s borrowing and debt management plans over a four-year horizon. It is designed to meet financing needs while minimising cost and managing risk.

The strategy covers federal government debts, including the external debt of sub-nationals, but excludes the domestic debts of states. It also accounts for explicit contingent liabilities of the federal government.

Developed with support from the World Bank and IMF, the new MTDS replaces the 2020–2023 strategy and incorporates more current macroeconomic assumptions in light of recent fiscal and monetary developments.

The document reveals that Nigeria’s debt portfolio composition-originally targeted at 70:30 in favour of domestic debt—was skewed to 57:43 by 2024 due to a sharp rise in external borrowings and the depreciation of the naira.

The official exchange rate used in the 2024 budget was N800 per dollar, but the actual end-of-year rate stood at N1,535.32 per dollar.

This significant devaluation, the DMO said, inflated the external component of the debt stock and raised debt service obligations.

However, the government outperformed some of its key debt sustainability targets. The average time to maturity (ATM) of federal debt stood at 11.05 years in 2024, above the minimum target of 10 years. Debt maturing within one year made up 13.91% of the total portfolio, well within the maximum 20% threshold, while the ratio of long-term to short-term domestic debt was 82:18, exceeding the 75:25 target.

Based on the Ministry of Budget and Economic Planning numbers, the MTDS projects a rebound in the economy, with real GDP expected to grow to 4.6% in 2025, 4.4% in 2026, and 5.5% in 2027, driven by infrastructure investment, agriculture, and social spending.

Inflation is projected to fall to 10.04% by 2027 as both fiscal and monetary authorities pursue tighter stabilisation policies. Interest rates are also expected to remain high but begin a gradual decline.

The DMO estimates that yields on short-term government securities will rise by 300 basis points in 2025 from 29.75% at end-2024, before easing to 30.75% in 2027.

Similarly, yields on five, seven, and ten-year FGN bonds are projected to rise in 2025 and taper off by 2027.

According to the DMO, the alternative strategies outlined in the MTDS were developed in line with the government’s funding requirements and borrowing plans, leveraging both domestic and external sources.

These include existing instruments and new ones such as the Domestic FGN US Dollar Bond, introduced in September 2024, as well as proposed Environmental, Social, and Governance (ESG)-compliant securities, subject to prevailing market conditions.