President Tinubu has written to the National Assembly requesting approval for a fresh external borrowing of N1.77 trillion to finance critical projects.
President Bola Tinubu has submitted a request to the National Assembly, seeking approval for a new external borrowing plan amounting to N1.767 trillion, which is approximately $2.209 billion.
If approved, the loan will be utilized to partially cover the N9.7 trillion shortfall in the 2024 budget.
The speaker read the president’s request during Tuesday’s plenary session.
The president has additionally submitted the Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) for 2025-2027 to parliament, along with an amendment bill aimed at establishing changes in the National Social Investment Programme. This legislation seeks to designate the social register as the main instrument for executing federal government social welfare initiatives.
This follows a recent statement from the Central Bank of Nigeria indicating that the Federal Government expended $3.58 billion on servicing foreign debt during the first nine months of 2024.
According to a report on international payment statistics from the Central Bank of Nigeria (CBN), this amount marks a 39.77 percent increase compared to the $2.56 billion spent during the equivalent period in 2023.
The report states that the largest monthly debt servicing payment in 2024 was $854.37 million, occurring in May, whereas the greatest monthly expenditure for 2023 reached $641.70 million and took place in July.
The pattern of international debt servicing by the CBN underscores Nigeria’s increasing cost of managing its debt obligations.
A more detailed analysis of international debt figures revealed that in January 2024, the costs associated with servicing debt increased dramatically by 398.89 percent, climbing to $560.52 million from $112.35 million in January 2023. In contrast, February experienced a minor decrease of 1.84 percent in payments, which fell from $288.54 million in 2023 to $283.22 million in 2024.
In March, payments decreased by 31.04 percent, dropping from $400.47 million to $276.17 million compared to the same period last year. Conversely, April experienced a substantial increase of 131.77 percent in payments, rising to $215.20 million in 2024 from $92.85 million in 2023.
In May 2024, debt servicing payments peaked at $854.37 million, representing a significant increase of 286.52% from the $221.05 million spent in May 2023. Conversely, June experienced a decline of 6.51%, with expenditures falling to $50.82 million in 2024 compared to $54.36 million in June the previous year.
In July 2024, there was a reduction of 15.48%, with payments decreasing from $641.70 million in July 2023 to $542.50 million. In August, the decline continued at a rate of 9.69%, resulting in payments dropping to $279.95 million compared to $309.96 million in August 2023. Conversely, September witnessed an increase of 17.49% as payments rose from last year’s figure of $439. 06 million to $515. 81 milli on .
In light of increasing exchange rates, the data highlights concerns about the mounting pressure from Nigeria’s foreign debt obligations.
As of June 30, 2024, the combined debts of Nigeria’s 36 states increased to N11.47 trillion, even with allocations from the Federal Accounts Allocation Committee (FAAC) and their individual internally generated revenues (IGR).
An analysis of data from the public debt reports published by the Debt Management Office (DMO) indicated a 14.57 percent increase compared to the N10.01 trillion recorded in December 2023.
During the review period, external debt for both the states and the Federal Capital Territory increased from $4.61 billion to $4.89 billion.
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In terms of naira, the debts rose by 73.46 percent, going from N4.15 trillion to N7.2 trillion due to the devaluation of the naira from N899.39 per dollar in December 2023 to N1,470.19 per dollar by June 2024.
However, the domestic debt for states and the FCT decreased from N5.86 trillion to N4.27 trillion.
In June 2024, Nigeria’s public debt amounted to N134.3 trillion, with the states and the Federal Capital Territory responsible for this total—a reduction from their 10.29 percent share in December 2023—even though their nominal debt levels had risen.
Channels Television previously reported that in 2023, sub-national governments struggled with an ongoing dependency on borrowing to fund their budgets. Consequently, the total debt stock of the 36 states increased by 38.1%, rising from N7.25 trillion in 2022 to N10.01 trillion.
According to BudgIT’s 2024 State of States report released on Tuesday, the rise in debt was partially attributed to a N606.12 billion increase in domestic debt, leading to an average annual growth rate of 11.4% by December 31st, 2023.
The overall domestic debt amounted to N5.86 trillion.
The situation became more complex due to an increase in foreign debt, which rose by 4.1%, from $4.43 billion in 2022 to $4.61 billion in 2023.
The report indicates that the liberalization of the exchange rate worsened financial pressure on states, substantially increasing their foreign loan repayment obligations in terms of naira.
Lagos State continued to hold the largest foreign currency debt, representing 26.9% of the total external debt, amounting to $1.24 billion.
The DMO’s report follows a BudgIT analysis indicating that, in 2023, the 32 states of the federation depended on FAAC for at least 55 percent of their total revenue.
According to the 2024 report published last week, this development highlights how dependent state governments are on federally distributed revenue and underscores their vulnerability to shocks caused by fluctuations in crude oil prices and other external factors.
The report also indicated that 14 states depended on FAAC receipts for a minimum of 70% of their total revenue. Additionally, at least 62% of the recurrent revenue in 34 states came from transfers from the federation account, with Lagos and Ogun being exceptions. Meanwhile, federal transfers constituted at least 80% of the recurrent revenue for 21 states.
During the 2023 fiscal year, the total revenue of all 36 states in Nigeria saw a significant rise of 31.2 percent, climbing from N6.6 trillion in 2022 to N8.66 trillion.
This growth rate surpassed the prior year’s 28.95 percent increase, reflecting a significant enhancement in fiscal performance.
In 2023, Lagos State contributed N1.24 trillion to the total revenue, accounting for 14.32% of the combined income generated by all 36 states.
The Gross FAAC increased by 33.19 percent from N4.05tn in 2022 to N5.4tn in 2023, accounting for 65 percent of the annual growth in the total revenue of all 36 states.
Thirty-two states depended on FAAC receipts for a minimum of 55 percent of their total revenue, whereas fourteen states relied on these receipts for at least 70 percent of their overall income.
Additionally, funds transferred to states from the federation account made up a minimum of 62% of the recurrent revenue for 34 states, excluding Lagos and Ogun. Moreover, federal transfers accounted for at least 80% of the recurrent revenue in 21 of these states.
The image depicted above highlights the state governments’ excessive dependence on federally distributable revenue and underscores their susceptibility to shocks induced by crude oil and other external factors.
The report offers an in-depth analysis of the fiscal sustainability of various states, assessing how effectively they balance internally generated revenue with federal allocations.
