Nigeria’s external debt may rise to $45.1 billion by the end of 2024 as the Federal Government advances plans to secure additional external funding.
The Debt Management Office (DMO) revealed in its latest report that the country’s external debt stock increased by $780 million in the second quarter of 2024, growing from $42.12 billion in March to $42.9 billion as of June 2024.
In a fresh development, the Federal Executive Council, last Thursday, approved a $2.2 billion external borrowing plan as part of the Federal Government’s 2024 Appropriation Act financing programme.
The Minister of Finance, Wale Edun, announced the decision during a briefing with State House correspondents after the FEC meeting at the Aso Rock Villa in Abuja.
According to Edun, the borrowing plan included a combination of Eurobond and Sukuk offerings, valued at $1.7 billion and $500 million respectively.
The funds were expected to bolster Nigeria’s fiscal stability amid ongoing economic reforms.
Edun said the final allocation between the financial instruments would be determined based on market conditions and advice from transaction advisors, pending National Assembly approval.
“The first (memo) was to complete the borrowing programme of the FG in terms of the external borrowing with the approval of the $2.2 billion financing programme made up of access to the international capital market for some combination of the Euro bond offer and the Sukuk bond offer.
“A Euro bond of about $1.7 billion and Sukuk financing of another $500 million the actual makeup of the financing which will be done as soon as the National Assembly has considered and seen fate to hopefully approve of the borrowing plan and the external borrowing approval is given, it will be done this year, as soon as possible after approval.
“The actual combination of instruments that will be raised will depend on what the advisors, the transaction advisors, the commercial advisers, and what they say about market conditions at the time we decide and we want to enter the market”, Edun explained.
In its report, the DMO noted that Nigeria’s external debt experienced a notable increase in its naira valuation between 31 March 2024, and 30 June 2024, due to naira devaluation.
On 31 March 2024, the total external debt was valued at $42.12 billion equivalent to N56.02 trillion, using an exchange rate of N1,330.26/$1.
By 30 June 2024, the external debt rose marginally to $42.90 billion but surged to N63.07 trillion in naira terms due to a higher exchange rate of N1,470.19/$1.
This represents a 12.59 per cent increase in the naira valuation of external debt within the period, largely driven by the naira’s depreciation.
While the dollar-denominated debt grew by just 1.87 per cent, the significant devaluation amplified the burden of external debt in local currency terms, further emphasising the exchange rate’s critical role in Nigeria’s debt sustainability.
Justifying the borrowing, 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 $3.58 billion servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56 billion 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.
