Public debt rises to N82 trillion after naira unification

President Bola Tinubu
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Nigeria’s total public debt rose by fiat to N82 trillion following the unification of the naira. It was N73 trillion before the unification.

The central bank of Nigeria issued a press release titled Operational Changes to the Foreign Exchange Market, signaling a unification of the multiple exchange rates.

This is in line with the instruction of the president, Bola Ahmed Tinubu who first announced this as a policy change in his inauguration broadcast.

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However, the implementation of the scheme which saw the exchange rate first depreciate to N662/$1 attracts several consequences for the economy one of which includes the automatic increase of the public debt.

screenshot 2023 06 14 at 11 59 04 pm
Nigeria’s Public Debt Profile.
Source: Nairametrics

Impact on Public Debt
Before now, the nation’s public debt was quoted at N448.50/$1 by the Debt Management Office as the official exchange rate but this has now been depreciated to N662/$1.

  • This means the total public debt increases from an estimated N79 trillion to N82 trillion.
  • The increase is due to the conversion of the dollar portion of the debt which is estimated at about $41.6 billion. When adjusted for the most recent exchange rate it converts to N27.6 trillion.
  • The naira portion of Nigeria’s public debt is about N54.3 trillion and it includes Ways and Means which Nairametrics estimates at about N26.8 trillion.

But while the naira portion of the loan increases the dollar value drops.

Other considerations

It is important to note that the actual obligations of the public debt do not change as Nigeria still needs to pay the debt of $41.6 billion in foreign currency and not in naira.

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Thus the conversion is purely for the purposes of reporting.

While the public debt is expected to increase when converted, the government’s revenue profile is also likely to rise.

  • All the government’s revenue from the sale of crude oil, and taxes (converted in USD) will all increase by fiat, meaning more money for the government.

Why Public debt is in naira and dollars
Public debt refers to the total amount of money that a government owes to domestic and foreign creditors.

  • It represents the cumulative borrowing by the government to finance its budget deficits and cover expenditures beyond its tax revenues.
  • Public debt plays a crucial role in funding government operations, stimulating economic growth, and addressing fiscal challenges.
  • It can be used to finance infrastructure projects, social programs, and other government initiatives.
  • Public debt is typically denominated in both the domestic currency (in this case, naira) and foreign currency (usually dollars), reflecting the sources from which the government borrows.

Why multiple currencies? The use of multiple currencies in denominating public debt serves specific purposes.

  • First, denoting debt in the domestic currency (naira) means the government must have borrowed some of the loans in naira.
  • This allows the government to have more control over the debt repayment process. It means that the government can make repayments using its own currency, which it can print or control the supply of.
  • This provides a degree of flexibility and reduces the risk of default due to foreign exchange fluctuations.

On the other hand, denominating public debt in foreign currency (such as dollars) provides access to international capital markets and a broader investor base.

  • It allows the government to tap into global funding sources and potentially secure more favorable borrowing terms.
  • Foreign currency-denominated debt can be attractive to investors seeking diversification and stability, as it is less influenced by domestic economic conditions.
  • However, it also exposes the government to exchange rate risks.
  • If the domestic currency depreciates significantly against the foreign currency, the burden of debt repayment in local currency terms can become more challenging.

The mix of naira and dollar-denominated public debt reflects the government’s need for a balanced approach that considers both domestic and international borrowing conditions.

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Credit: Nairametrics

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Sanya Onayoade

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SANYA ONAYOADE is a graduate of Mass Communication and a Master of Communication Arts degree holder from the University of Ibadan. He has attended local and international courses on Media, Branding, Public Relations and Corporate Governance in many institutions including the University of Pittsburgh; Reuters Foundation of Rhodes University, South Africa and Lagos Business School. He has worked in many newspaper houses including The Guardian and The Punch. He was the pioneer Corporate Affairs Manager of Odua Telecoms Ltd, and later Head of Business Development and Marketing of Nigerian Aviation Handling Company (NAHCO Plc).

He has led business teams to several countries in the US, Asia and Europe; and was part of an Aviation investment drive in West Africa. He has also driven media and brand consultancy for a few organizations such as the British Council, Industrial Training Fund, PKF Audit/Accounting Firm and Nigeria Stability and Reconciliation Programme. He is a Fellow of Freedom House, Washington DC, and also Fellow of Institute of Brand Management of Nigeria. Sanya is a member of Nigerian Institute of Public Relations (NIPR), Advertising Practitioners Council of Nigeria (APCON) and Project Management Institute (PMI). He is a 1998 Commonwealth Media Awards winner and the Author of A Decade Of Democracy.
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Morak Babajide-Alabi is a graduate of Mass Communication with a Master of Arts Degree in Journalism from Napier University, Edinburgh, United Kingdom. He is an experienced Social Media practitioner with a strong passion for connecting with customers of brands.

Morak works as part of a team currently building an e-commerce project for the Volkswagen Group UK. Before this, he worked on the social media accounts of SKODA, Audi, SEAT, CUPRA, Volkswagen Passenger Cars, and Volkswagen Commercial Vehicles. In this job, he brought his vast experience in journalism, marketing, and search engine optimisation to play to make sure the brands are well represented on social media. He monitored the performance of marketing campaigns and data analysis of all volumes of social media interaction for the brands.

In his private capacity, Morak is the Chief Operating Officer of Syllable Media Limited, an England-based marketing agency with head office in Leeds, West Yorkshire. The agency handles briefs such as creative writing, ghostwriting, website designs, and print and broadcast productions, with an emphasis on search engine optimisation. Syllable Media analyses, reviews, and works alongside clients to maximise returns on their businesses.

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Morak is a dependable team player who succeeds in a high-pressure environment. He started his professional career with the flagship of Nigerian journalism – The Guardian Newspapers in 1992 where he honed his writing and editing skills before joining TELL Magazine. He has edited, reported for, and produced newspapers and magazines in Nigeria and the United Kingdom. Morak is involved in the development of information management tools for the healthcare sector in Africa. He is on the board of DeMiTAG HealthConcepts Limited, a company with branches in London, Lagos, and Abuja, to make healthcare information available at the fingertips of professionals. DeMiTAG HealthConcepts Limited achieved this by collaborating with notable informatics companies. It had partnered in the past with Avia Informatics Plc and i2i TeleSolutions Pvt.

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Brief Profile of Ademola Akinbola

Ademola AKINBOLA is an author, publisher, trainer, digital marketing strategist, and a brand development specialist with nearly three decades of experience in the areas of branding, communication, corporate reputation management, business development, organizational change management, and digital marketing.

He is the Founder and Head Steward at BrandStewards Limited, a brand and reputation management consultancy. He is also the Publisher of The Podium International Magazine, Ile-Oluji Times, and Who’s Who in Ile-Oluji.

He had a successful media practice at The Guardian, Punch and This Day.

He started his brand management career at Owena Bank as Media Relations Manager before joining Prudent Bank (now Polaris Bank) as the pioneer Head of Corporate Affairs.

The British Council appointed him as Head of Communication and Marketing to co-ordinate branding and reputation management activities at its Lagos, Abuja, Kano and Port Harcourt offices.

In 2007, he was recruited as the Head of Corporate Planning and Strategy for the Nigerian Aviation Handling company. He led on the branding, strategic planning and stakeholder management support function.

His job was later expanded and redesigned as Head of Corporate Communication and Business Development with the mandate to continue to execute the Board’s vision in the areas of Corporate Planning and Strategy, Branding and New Businesses.

In 2010, he voluntarily resigned from nacho aviance to focus on managing BrandStewards, a reputation and brand management firm he established in 2003. BrandStewards has successfully executed branding, re-branding and marketing communication projects for clients in the private and public sectors.

Ademola obtained a M.Sc. Degree in Digital Marketing & Web Analytics from Dublin Institute of Technology in 2016, and the Master of Communication Arts degree of the University of Ibadan in 1997. He had previously obtained a Higher National Diploma (with Upper Credit) in Mass Communication from Ogun State Polytechnic, Abeokuta.

He has published several articles and authored five management books.

He has benefitted from several domestic and international training programmes on Brand Management, Corporate Communications, Change Management and Organizational Strategy.
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