Nigeria's External Debt Surges by N30 Trillion Amid Naira Devaluation

Nigeria's External Debt Surges by N30 Trillion Amid Naira Devaluation

Nigeria's economic woes have deepened as the nation's external debt skyrocketed by N30.03 trillion between 2023 and June 2024, primarily due to the naira's depreciation. This staggering increase is particularly concerning when viewed in local currency terms, despite a marginal decrease in the country's debt when measured in US dollars.

As of June 1, 2023, Nigeria's external debt stood at $43.16 billion, equivalent to N33.25 trillion at the exchange rate of N770.38 to the dollar. The International Monetary Fund (IMF) holds $1.61 billion of this debt, accounting for 3.75% of the total. The World Bank's share totals $16.32 billion, primarily owed to the International Development Association.

By June 1, 2024, the naira had depreciated by 47.6%, with the exchange rate rising to N1,470.19 to the dollar. Consequently, Nigeria's external debt dropped to $42.90 billion but surged to N63.07 trillion in local currency. This represents a 0.60% decrease in dollar terms and a staggering 89.7% increase in naira terms.

The naira's devaluation has added significant pressure to Nigeria's debt burden. Had the June 2023 exchange rate been applied, the external debt would have stood at N33.05 trillion, indicating that currency fluctuations alone contributed N30.02 trillion to the debt within a year.

Nigeria's external debt now accounts for 46.96% of the country's total debt, up from 38.05% in June 2023. The face value of the debt in dollar terms has remained relatively stable, but the naira's depreciation has driven up the local currency equivalent.

The Debt Management Office's report underscores the challenges Nigeria faces in managing its external debt amidst currency volatility. Rising debt servicing costs and a weakening naira threaten the country's economic growth prospects.

Experts emphasize the need for fiscal discipline, diversified revenue streams, and proactive debt management strategies to mitigate Nigeria's debt vulnerabilities. The government's response to these challenges will be crucial in shaping the nation's economic future.