Nigeria’s Debt Management Office (DMO) reports that the federal government’s Promissory Notes debt surged to N1.65 trillion as of June 2024, marking a 6.5% increase from March 2024.
This form of domestic debt has seen a staggering 114% rise since President Bola Tinubu took office.
Promissory Notes, a debt instrument that includes a written commitment by the issuer (in this case, the government) to repay a specific amount, have become a primary mechanism for the federal government to meet obligations it cannot fund immediately with revenue or cash.
This sharp rise highlights the government’s growing reliance on Promissory Notes for financial commitments.
Key Insights from the data
The DMO’s 2024 half-year public debt report reveals that Nigeria’s domestic and foreign public debt rose to N71.2 trillion and $42.9 billion, respectively.
- This is a notable increase from December 2023, where domestic debt stood at N59.1 trillion and foreign debt at $42.4 billion, reflecting rises of 20.4% and 1.1%, respectively.
- Domestic debt, in particular, has spiked under Tinubu’s administration, climbing from N54.1 trillion in June 2023 to the current N71.2 trillion.
- Notably, Promissory Notes accounted for a significant portion of this increase, totalling N780 billion as of June 2023.
Why are promissory notes increasing
Nairametrics reported in January that the government struggled to redeem its Promissory Notes after it ceased relying on central bank funding through Ways and Means.
A Central Bank of Nigeria report cited by Nairametrics attributed the spike in Promissory Notes, as of December 2023, to incentives owed to exporters under the Export Expansion Grant (EEG) scheme, obligations that predate the Tinubu administration.
While specific reasons for the N342.6 billion rise in Promissory Notes in 2024 were not detailed, Nairametrics’ research suggests it may be linked to outstanding debts to government contractors, suppliers, and oil marketers.
Fiscal Deficit escalates
A recent report from Nairametrics highlights that Nigeria’s budget deficit reached 7.6% of GDP as of August 2024, overshooting the approved 3.8% target for the year.
- This concern was echoed in statements from Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) members, who pointed to the widening gap between revenue and spending.
- For 2024, the National Assembly approved a budget of N28.7 trillion with a revenue target of N19.5 trillion, forecasting a budget deficit of N9.1 trillion, or about 3.8% of GDP.
- However, the deficit has surpassed projections, with a supplementary budget of N6.2 trillion introduced later in the year, further intensifying fiscal pressures.
Outlook for the 2025 Fiscal Year
The federal government has announced a proposed budget of N47.9 trillion for 2025. Atiku Bagudu, Minister of Budget and Economic Planning, shared this update after a Federal Executive Council (FEC) meeting chaired by President Tinubu.
- Bagudu disclosed that the council 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 budget framework also sets the exchange rate at N1,400 per dollar and projects a gross domestic product (GDP) growth rate of 6.4%.
- As fiscal challenges persist, the federal government’s increasing reliance on Promissory Notes and rising debt levels underscore the need for sustainable fiscal strategies.
The 2025 budgetary framework will be critical in shaping the economic trajectory under the Tinubu administration.
