According to the Debt Management Office (DMO), Nigeria’s total public debt stock stood at N42.8tn in H1-2022. This represents a 20.8% y/y increase from N35.5tn recorded in H1-2021. On a q/q basis, total public debt stock climbed by 3.0% compared to N41.6tn in Q1-2022. A deeper dive into the total public stock reveals that external debt increased by 21.2% y/y to N16.6tn in H1-2022 (vs H1-2021: N13.7tn). On the other hand, domestic debt from the local debt market rose by 20.6% y/y to N26.2tn in H1-2022 (vs H1-2021: N21.8tn). Nigeria’s debt burden continues to worsen in the face of underperformance of revenue generation following lower-than-expected oil output (due to theft, pipeline vandalism and low CAPEX allocations) and the depreciation of the Naira.

Nigeria’s increasingly expanding debt burden has continued to place further pressures on the government to depend on the debt market to finance its deficit. This has come from sustained recurrent expenditures and under-par revenue performance. Notably, the country only generated a total of N1.6bn between Jan-Apr 2022, 50.9% less than the pro-rata budget. Despite ailing revenue, the Federal Government (FG) spent N1.9tn on debt servicing payments for the same period under review (c. 118.9% of the total revenue generated). Subsequently, debt servicing to revenue printed at 88.1% in 2021 vs 84.0% in 2020. Thus far, the most recently available budget document revealed that debt servicing to revenue ratio lies at 48.0% in 2022 (Jan-Apr).

Looking forward, our outlook for Nigeria’s debt burden remains gloomy. We expect total public debt stock to continue to spike, given the current fiscal imbalance driven by the shortfall in revenue in 2022. We project that revenue performance will fall below expectations, primarily due to the poor oil revenue performance, which has returned just 39% of the projected budget as of April 2022. The FGN’s incessant to run subsidy programs will also increase the government’s fiscal obligations. Also, the increase in the FY-2022 budget to N17.1tn will continue to drive the FG’s appetite to seek funding in the debt market to finance its recurrent and capital expenditures and service its debt.