Nigeria is bracing for a potential surge in domestic debt, with indications that it could surpass N57.5 trillion. This follows the recent restructuring of the outstanding balance on the Ways and Means Advances from the Central Bank of Nigeria (CBN).
The Debt Management Office (DMO) revealed that the country’s domestic debt soared by N1.80 trillion, reaching N50.2 trillion by the end of the third quarter of 2023, primarily attributed to heightened borrowings from the bond market.
The country’s domestic debt is set to rise much higher as the Senate approved the securitization of the outstanding N7.3 trillion in Ways and Means Advances in line with President Bola Tinubu’s request.
This legislative endorsement is poised to contribute to a further uptick in the country’s domestic debt. It echoes a pattern observed in previous restructuring efforts.
More Insights
The Ways and Means Advances allows the government to secure emergency financing from the CBN to address cash flow gaps.
Notably, between May 3 and 4, 2023, both chambers of the National Assembly endorsed the securitization of N22.7 trillion from the N23.3 trillion previously advanced by the CBN. This move contributed to a substantial increase in Nigeria’s total public debt.
This debt was subsequently transferred to the DMO with a 40-year tenor, a 3-year moratorium, and an interest rate of 9%. The earlier debt restructuring made Nigeria’s total soar to N87.38tn by the end of the second quarter of 2023. This figure was a substantial increase of 75.29%, equating to N37.53 trillion, when juxtaposed with the N49.85 trillion recorded at the end of March 2023.
Nairametrics earlier reported that the Federal Government of Nigeria tapped into the CBN for a substantial N2.94 trillion through Ways and Means Advances between July and December 2023. It was also disclosed that the Federal Government borrows from the CBN via this financing facility to service domestic debt.
As Nigeria navigates the complexities of its fiscal landscape, the impact of the recent debt restructuring on domestic debt levels will necessitate a careful evaluation of debt sustainability and effective management strategies.
