Looming Crisis: Nigeria’s External Debt Set to Reach $45.1 Billion by 2024

Rising Debt Burden Sparks Concerns Amid Economic Reforms

Introduction
Nigeria’s external debt could escalate to $45.1 billion by the close of 2024, raising concerns about the country’s debt sustainability. This projection follows the Federal Government’s approval of a $2.2 billion external borrowing plan, intended to finance the 2024 Appropriation Act. With Nigeria’s external debt already rising by $780 million in the second quarter of 2024, experts warn of a potential fiscal crisis if the trend continues unchecked.

The Debt Situation: A Snapshot
According to the Debt Management Office (DMO), Nigeria’s external debt grew from $42.12 billion in March 2024 to $42.9 billion by June 2024. This represents a significant increase of $780 million in just three months. The recently approved $2.2 billion borrowing plan—which includes Eurobonds worth $1.7 billion and $500 million in Sukuk offerings—will further inflate Nigeria’s external debt by year-end.

Finance Minister Wale Edun defended the move, stating that the country’s ability to secure such funding demonstrates global confidence in the economic reforms led by President Bola Ahmed Tinubu. However, critics argue that this rising debt could jeopardize the nation’s economic stability.

Debt Servicing: A Growing Challenge
In the first nine months of 2024, Nigeria spent $3.58 billion servicing its external debt, marking a 39.77% increase compared to the $2.56 billion spent during the same period in 2023. This rising debt servicing cost highlights the immense financial pressure on the government, with a significant portion of the national revenue being channeled towards fulfilling debt obligations.

Reactions to the Rising Debt
The Centre for the Promotion of Private Enterprise (CPPE) expressed concerns about Nigeria’s increasing reliance on external borrowing. Director Muda Yusuf criticized the unsustainable debt trajectory, citing the government’s insufficient revenue generation and persistent infrastructural challenges as underlying issues. These factors, he argued, exacerbate the nation’s fiscal vulnerabilities.

Broader Economic Implications
Nigeria’s total debt stock reached N134.3 trillion as of June 2024, according to the DMO. This staggering figure, coupled with the ongoing need for foreign loans, underscores the urgent need for structural reforms in revenue generation and fiscal management. Without addressing these underlying issues, Nigeria risks being trapped in a cycle of debt dependence, further straining its fragile economy.

Conclusion
As Nigeria’s external debt approaches a record $45.1 billion by the end of 2024, stakeholders are calling for urgent measures to curb borrowing and improve revenue streams. While the government insists that external funding supports critical reforms, the rising debt servicing costs and economic vulnerabilities suggest otherwise. Moving forward, balancing fiscal responsibility with developmental goals will be crucial to avoiding a full-blown debt crisis.