The Debt Management Office (DMO) has reported a notable increase in Nigeria’s domestic debt stock, which reached N66.957 trillion by mid-2024, marking an 8.74% rise from the N61.578 trillion recorded at the end of the first quarter.

The federal government took on an additional N5.379 trillion in domestic debt in the second quarter through various instruments, including FGN Bonds, Nigerian Treasury Bills (NTBs), FGN Savings Bonds, and Promissory Notes. This follows an even steeper increase in the first quarter of 2024, where domestic debt rose by N8.32 trillion.

The alarming growth of Nigeria’s debt, combined with its heavy debt-servicing obligations, is straining national revenue, with the government saying that around 70% of its income goes to servicing debt.

As of Q1 2024, Nigeria’s domestic debt stood at N61.578 trillion—a significant 15.62% jump from N53.258 trillion at the close of 2023. This indicates a rapid borrowing pace, with the government accumulating N8.32 trillion in new debt within the first three months of 2024 alone. The debt expansion in Q1 outpaced that of Q2, demonstrating an aggressive borrowing pattern during the initial months of the year, partly to cover the fiscal gap and maintain economic momentum amid rising inflation and economic uncertainty.

The rising debt is largely driven by an urgent need to fund a ballooning budget deficit, initially projected at N9.1 trillion—equivalent to approximately 3.8% of Nigeria’s GDP for 2024. However, additional fiscal challenges compelled the government to introduce a supplementary budget of N6.2 trillion, further escalating borrowing needs. Analysts note that this dependence on debt financing to meet short-term obligations exposes the economy to sustainability risks, as borrowing now accounts for the majority of government revenues.

With debt servicing costs surpassing N4 trillion as of the first half of 2024, the government’s fiscal health is strained. This heavy burden also restricts the government’s ability to respond to economic shocks or invest in long-term growth initiatives, creating a cyclical dependence on further borrowing. It’s also significantly limiting resources available for critical infrastructure and social programs.

Key Drivers of Debt Growth

The country’s rising debt load reflects its struggle to manage significant fiscal gaps alongside soaring inflation. The CBN’s stringent monetary policy measures to address inflation, which involves raising the monetary policy rate, have inadvertently increased the cost of government borrowing – although it has made government securities more attractive to investors, leading to higher domestic debt uptake. Additionally, these instruments are perceived as safe, tax-exempt investments, adding to their appeal amidst economic uncertainty.

As of June 2024, Nigeria’s money supply (M3) reached N101.461 trillion, marking a 56.32% year-on-year increase from N64.906 trillion in June 2023, and further expanded to N108.954 trillion by September.

FGN Bonds Dominate The Debt Structure

FGN Bonds remain the predominant instrument within Nigeria’s domestic debt structure, comprising N52.315 trillion or 78.13% of the total domestic debt by June 2024. During the first half of 2024, FGN Bonds accounted for N8.055 trillion out of the N13.699 trillion raised, representing 58.8% of new debt.

Nigerian Treasury Bills (NTBs) represent the second-largest component, with a total debt stock of N11.808 trillion, or 17.64% of the domestic debt. Within the first half of the year, the government raised N5.286 trillion through NTBs, accounting for 38.59% of additional debt incurred. NTBs provide a shorter-term debt solution compared to FGN Bonds, though the reliance on them reflects the government’s ongoing need to address immediate cash flow concerns.

Promissory Notes accounted for N1.671 trillion, or 2.5% of the debt stock, while FGN Savings Bonds represented the smallest share at N55.2 billion, or just 0.08%. Other instruments such as FGN Sukuk and Green Bonds remain in the debt portfolio, with no new Sukuk issues recorded for H1 2024 and Green Bonds still awaiting maturity by 2026.

Domestic Dollar Bond

In Q3 2024, Nigeria introduced a new debt instrument, the ‘domestic dollar bond,’ to increase its funding avenues within the local market. This move is expected to further raise domestic debt levels, though it provides an alternative source of capital. With this addition, Nigeria is attempting to diversify its debt instruments to attract more investors and offer flexibility in managing its debt structure.

However, economists have warned that as the CBN maintains its tight monetary policy stance, the cost of debt servicing will continue to climb, straining public finances further. They noted that the country’s debt trajectory highlights the vulnerability of its fiscal sustainability, as a significant portion of its limited revenue base is dedicated to servicing debt, leaving minimal room for development spending.

While the DMO’s efforts to diversify debt instruments, including introducing bonds denominated in dollars, indicate a short-term strategy to manage the situation, experts have pointed out that sustainable solutions will require broader policy adjustments and fiscal discipline to reduce reliance on debt-financed expenditures.

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MultiChoice Group, a leading South African pay-TV operator, has revealed a steep decline in its Nigerian subscriber base, losing 243,000 customers across its DStv and GOtv services between April and September 2024.

The company attributed this downturn largely to Nigeria’s soaring inflation, which has exceeded 30%, spurred by rising food, fuel, and electricity costs. For the six months ending in September, MultiChoice noted that both Nigeria and Zambia were key contributors to its shrinking subscriber base across the African continent, with Nigeria facing inflationary pressures and Zambia contending with severe power outages due to drought conditions.

MultiChoice’s Nigerian unit has experienced notable losses recently. This year’s report adds to the previous disclosure from the financial year ending March 2024, where MultiChoice noted an 18% reduction in Nigerian subscribers, further highlighting the impact of high living costs on consumers.

Across its Rest of Africa operations, MultiChoice reported a total loss of 566,000 subscribers, a notable but improved decrease compared to the 803,000 subscribers lost during the second half of the previous financial year. Zambia and Nigeria together accounted for the majority of this downturn, with Zambia’s energy crisis contributing significantly.

MultiChoice CEO Calvo Mawela addressed the difficulties posed by the current economic environment, describing the situation as the “most challenging operating conditions in nearly 40 years.” Mawela explained that in addition to typical currency fluctuations, abnormal currency weakness over the past year and a half has drained profits by around R7 billion.

To stabilize, the company has been focusing on reducing operating costs and streamlining its business model. Mawela expressed optimism, stating, “We are making good progress in addressing the technical insolvency that resulted from non-cash accounting entries at the end of the last financial year.”

He further assured that the group is expected to return to a positive net equity position by November 2024, citing over ZAR10 billion in liquidity as a buffer.

Rising Streaming Competition and MultiChoice’s Strategic Shift

In response to increased competition from streaming platforms and shifting consumer habits, MultiChoice is recalibrating its strategy. Mawela acknowledged the challenge, noting that Showmax, MultiChoice’s streaming service, achieved a 50% year-on-year growth in paying subscribers, which positions the company to participate actively in the continent’s evolving streaming market.

To meet demand and expand its streaming presence, MultiChoice allocated an additional ZAR1.6 billion to support Showmax’s growth.

MultiChoice Nigeria’s response to inflation has included three price increases on its DStv and GOtv bouquets within the past year—first in April 2023, followed by another in November, and a third implemented in May 2024. This most recent price adjustment led to legal challenges; in April, the Competition and Consumer Protection Tribunal (CCPT) in Abuja issued a ruling against the price hike following complaints from a Nigerian customer.

MultiChoice, however, proceeded with the price increase, which resulted in the Tribunal imposing a fine of N150 million on the company and ordering it to grant a one-month free subscription to its Nigerian customers.

What This Means for MultiChoice and the Nigerian Market

MultiChoice’s ongoing struggle in Nigeria is attributed to broader economic challenges facing consumers across Africa. The rising cost of living has placed considerable strain on consumer purchasing power, particularly in sectors like entertainment, which can be considered discretionary.

Additionally, the increased presence of affordable streaming services has presented a significant challenge to traditional pay-TV, as viewers turn to more flexible and cost-effective options. For MultiChoice, this shift underscores the importance of its investment in Showmax, which may be vital to the company’s future growth on the continent.

While MultiChoice’s strategy to mitigate financial loss through price increases and cost-cutting measures is essential to maintaining stability, it also underlines the delicate balance required to retain subscribers. The company’s recent price hikes, combined with Nigeria’s inflationary pressures, indicate that MultiChoice may continue to face a challenging environment unless broader economic conditions improve.