In the last two years, Ventures Africa has covered Nigeria’s debt problem. In 2022, we talked about how Nigeria’s rising debt might be a result of its spending problem. Last year, we wondered if there was an end in sight for Nigeria’s rising debt after the country’s total public debt increased by 75.29%, in three months. Now, Nigeria’s debt-to-GDP ratio has exceeded 50% for the first time, marking a more critical juncture for the country’s economic health. Nigeria now has a public debt portfolio of N121 trillion, consisting of a domestic debt of N65.6 trillion and a foreign debt portfolio of $42.1 billion.

As of December 2023, Nigeria’s nominal GDP stood at N229.9 trillion, with a real growth rate of just 2.74%. This indicates that the country’s debt-to-GDP ratio has surpassed 50% for the first time. This alarming rise serves as a critical warning, especially when paralleled with the current situation in Kenya, where efforts to service mounting debt have triggered widespread protest.

The Kenyan – Nigerian parallel

At the end June 2023, Kenya’s public debt increased to Ksh 10,278,673 million (70.8% of GDP) from Ksh 8,634,909 million in June 2022. In Kenya, a significant portion of’s revenue is channeled towards debt servicing, limiting the government’s ability to fund essential services. Then, in May, Kenya introduced what it called the Kenya Finance Bill 2024. The bill was aimed at increasing levies on a broad range of goods and services, aiming to generate additional revenue to manage the country’s debt obligations. The proposed tax hikes include an increase in VAT from 16% to 18% and the introduction of new taxes on mobile money transfers and internet data. However, these measures were not well-received by the public. The Finance Bill led to massive protests, with citizens fearing that the increased levies would exacerbate the already high cost of living.

Similarly, Nigeria’s public debt has been steadily increasing, driven by a combination of domestic and external borrowing. Nigeria’s total public debt increased from ₦59.12trn last December to ₦65.65trn as of March 2024. By the end of March, the country’s domestic and external debts stood at ₦121.67 trillion ($91.46 billion). Nigeria’s Debt Management Office (DMO) noted that the increase was from new borrowing to part-finance the 2024 Budget deficit. Again, a significant portion of Nigeria’s revenue has been channeled towards debt servicing, limiting the government’s ability to fund essential services. According to the DMO, Nigeria spent N7.8 trillion to service its debt obligations in 2023, a 121% increase compared to N3.52 trillion incurred in the previous year.

As a result, the federal government has been considering various measures, including increasing taxes and reducing subsidies. The government’s 2024 budget proposal introduced new taxes and increased existing ones, particularly in the non-oil sectors, to boost revenue. Strikingly, both countries are experiencing relatively tough economic times. The naira has weakened significantly by 26.8% since April. This depreciation has increased the cost of imports, contributing to inflation, which is at an all-time high at 33.95%. Similarly, the Kenyan shilling dropped by approximately 22% between March 2022 and January 2024.

Nigeria and Kenya’s experiences highlight the broader challenges faced by many African economies. Recently, the African Development Bank (AfDB) launched the African Debt Managers Initiative Network (ADMIN), to provide home-grown solutions to Africa’s debt challenges. The Bank disclosed that 13 African countries are currently at high risk of debt distress, while 6 are already in debt distress. These alarming debt trends signal growing concerns about the continent’s fiscal sustainability as high debt levels can deter foreign investment. As Nigeria navigates its historic debt levels, the lessons from Kenya’s protests provide a cautionary tale of the potential social backlash that can arise from government policies aimed at debt servicing.

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