Nigeria’s Debt Management Office (DMO) reports a significant increase in the federal government’s Promissory Notes debt, which reaches N1.65 trillion as of June 2024. This figure represents a 6.5% rise from March 2024 and marks a staggering 114% increase since President Bola Tinubu assumed office.
Promissory Notes, a form of debt where the government commits in writing to repay a specified amount, have become a key tool for meeting financial obligations amid cash flow challenges. This sharp rise highlights the government’s growing dependence on Promissory Notes to fulfill its commitments.
Key Takeaways from DMO’s Report
The DMO’s half-year public debt report for 2024 reveals that Nigeria’s total domestic and foreign debt stands at N71.2 trillion and $42.9 billion, respectively. This is a marked increase from December 2023, when domestic debt was N59.1 trillion and foreign debt at $42.4 billion, reflecting growth rates of 20.4% and 1.1%, respectively.
Under the Tinubu administration, domestic debt alone has surged from N54.1 trillion in June 2023 to N71.2 trillion currently. Notably, Promissory Notes make up a significant portion of this domestic debt increase, totaling N780 billion as of June 2023.
Reasons Behind the Surge in Promissory Notes
The federal government has increasingly turned to Promissory Notes due to challenges in meeting financial obligations after ending reliance on central bank funding through the Ways and Means facility. According to reports, the rise in Promissory Notes as of December 2023 is partly due to incentives owed to exporters under the Export Expansion Grant (EEG) scheme, a burden carried over from previous administrations.
While detailed reasons for the additional N342.6 billion in Promissory Notes debt in 2024 are not explicitly stated, it is believed to be linked to outstanding payments to government contractors, suppliers, and oil marketers.
Escalating Fiscal Deficit
Nigeria’s budget deficit has reached 7.6% of GDP as of August 2024, significantly exceeding the approved target of 3.8% for the year. This alarming fiscal gap is noted in recent statements from members of the Central Bank of Nigeria (CBN) Monetary Policy Committee, who express concerns over the widening disparity between government revenue and expenditure.
For the 2024 fiscal year, the National Assembly approved a budget of N28.7 trillion with a revenue target of N19.5 trillion, resulting in a projected deficit of N9.1 trillion or 3.8% of GDP. However, the deficit has exceeded initial estimates, leading to the introduction of a supplementary budget of N6.2 trillion later in the year, which further strains Nigeria’s fiscal outlook.
Projections for the 2025 Fiscal Year
Looking ahead, the federal government plans a proposed budget of N47.9 trillion for 2025. This was announced by Atiku Bagudu, the Minister of Budget and Economic Planning, following a Federal Executive Council (FEC) meeting chaired by President Tinubu.
The council has approved the Medium-Term Expenditure Framework (MTEF) for 2025-2027, setting the crude oil benchmark at $75 per barrel with an oil production target of 2.06 million barrels per day (bpd). The framework also sets an exchange rate of N1,400 per dollar and anticipates a GDP growth rate of 6.4%.
As Nigeria navigates these fiscal challenges, the federal government’s increasing reliance on Promissory Notes and rising debt levels underscore the urgent need for sustainable financial management strategies. The 2025 budget framework will play a critical role in shaping the nation’s economic future under the Tinubu administration.
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