As Nigerian president Muhammadu Buhari prepares to leave office in early 2023, the country’s debt remains one of the most debated topics of his tenure.
The conversation has often centred on the rise in debt and the cost of repaying. An April 2022 news story in an online publication reflected this.
“Nigeria’s Debt Increases By N4trn In 6 Years,” read the headline of the article in BizWatchNigeria.Ng, which describes itself as a “business intelligence portal”.
The intro to the article gives details: “Between 2015 and 2021, which is six years, Nigeria’s debt portfolio increased by 278.03% or N4.03 trillion.”
This would be an increase of US$9.7 billion at current exchange rates.
But do these numbers add up?
Online portal gets half the story
In response to our request for more information about this claim, the BizWatchNigeria’s managing editor, David Oputah, said no data was “used in curating this story”.
Instead, the data was “sourced from the statement made by the DMO DG.”
On 4 April, Patience Oniha, the director-general of Nigeria's debt management office (DMO), made a public presentation about the country's debt profile. The DMO manages the country’s borrowing.
According to BizWatchNigeria, Oniha said Nigeria was allowed to borrow N1.46 trillion in 2015, or 90.17% of that year’s N1.62 trillion budget deficit. The deficit is the gap between revenue and expenses.
For 2021, the allocation for new borrowing was N5.49 trillion, or 85.11% of the N6.45 trillion budget deficit.
The difference in these figures is N4.03 trillion, which the publication’s headline claims is an “increase” in debt.
Borrowing allocation not same as actual debt
The same numbers were also reported by leading news sources in Nigeria, such as Punch with the headline“FG’s new borrowings rise by 278.03% in six years”.
National TV station TVC’s story was titled “Nigeria's Debt Profile Rises as FG's Borrowings Increase to N4.03tn in 6 Years”. But crucially, like the Punch article, the anchor made clear it was “new borrowing allocations” that had risen by that much.
This distinction between “debt profile” and “new borrowing allocation” is an important one, economists told us.
A country’s “debt profile” is its total debt at a particular time, Peter Njiforti, professor of economics at the Ahmadu Bello University in northwestern Nigeria, told Africa Check.
He said that the increase in annual new borrowing was a sign that the government was trying to do more to stimulate the economy and meet its obligations, but that it was not earning enough to do this.
“So there is a huge budget deficit and the government has to borrow to fund it each year. The new government borrowing allocation increased because the budget deficit increased,” Njiforti said.
Data from the debt office shows Nigeria’s total public debt was N12.6 trillion ($65.43 billion) as of December 2015. In December 2021, it was at N39.56 trillion ($95.78 billion).
This means, contrary to BizWatchNigeria’s headline, Nigeria’s debt profile increased by N26.96 trillion between 2015 and 2021, and not N4.03 trillion.
Total public debt much greater than reported by BizWatchNigeria
The total public debt includes external and domestic debts owed by both the federal government and the state governments.
The 2021 data from the DMO further showed that:
- Nigeria’s public debt was N39.56 trillion ($95.78 billion). The federal government owed N33.13 trillion of this, and state governments N6.43 trillion.
- External debt was N15.86 trillion ($38.39 billion), which accounted for 40.08% of the total public debt. The balance of N23.70 trillion ($57.39 billion) was domestic debt.
Who does Nigeria owe?
Nigeria’s debt to China often comes under the spotlight. In 2021 we published a factsheet on this. As of 2021, the amount Nigeria owed China was less than 10% of the African country’s external debt. This was $3.63 billion or 9.47%.
Nigeria owes $18.66 billion or 48.6% of its external debt to multilateral organisations such as the International Monetary Fund, the World Bank, and the African Development Bank.
Its bilateral debt of $4.47 billion, or 11.63% of external debt, is held by five countries: China, France, Japan, India and Germany.
Eurobond and diaspora bonds make up $14.67 billion or 38.21% of external debt, while promissory notes or promises to pay accounted for $600.64 million or 1.56%.
‘Nothing wrong with borrowing for production’
If a country borrows to put up infrastructure and stimulate production then borrowing makes sense, experts told Africa Check.
“Generally, I will say debt is not bad, provided it is not misused or diverted due to corruption. There is nothing wrong if a country borrows to fund the development of infrastructure,” Ahmadu Bello University’s Njiforti said.
He said roads and bridges, for example, supported commerce activities and subsequently boosted the economy.
Gafar Ijaiya is a professor of economics at the University of Ilorin in northcentral Nigeria. He said concerns that Nigeria may be headed for a debt trap and may soon need debt relief, such as it did in 2005, are largely from politicians.
“Economists like us know that borrowing is part of the development and growth of the economy.”
“Going by the enormous expenses the government needs for infrastructure and other things to get the economy going, borrowing is inevitable. However, a country will have a problem when you borrow for consumption,” Ijaiya said.
The debt management office has justified government borrowing many times, arguing that the country’s debt is still sustainable. This has been despite concerns from lenders such as the IMF and the World Bank.
Conclusion: Publication didn’t distinguish between debt profile and borrowing allocation
The headline of an online news site recently claimed that Nigeria’s debt profile increased by N4 trillion between 2015 and 2021.
The actual story contradicts this headline, by referring to an increase in “new borrowing allocation”, and not debt profile, over the six years.
Official data shows Nigeria’s debt profile increased by N26.96 trillion ($64.83 billion) in the six years, more than six times the publication’s claim.
Experts said that increased borrowing was justified if the funds were channelled to growing the country’s economy.
