External debt rises to N13tn over naira depreciation

Nigeria’s weak naira has pushed the country’s external debt up by N13.38tn; findings by The PUNCH have shown.

Although the total external debt increased by $490m between the first quarter of 2023 and the second quarter of 2023, the value in naira increased significantly, according to data from the Debt Management Office.

The main reason for the wide margin in naira terms is the naira devaluation, which was triggered by the move by the Central Bank of Nigeria to unify the nation’s foreign exchange rates.

On June 14, 2023, the CBN directed Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ Window of the foreign exchange market, to enable its free float against the dollar and other global currencies.

It said, “The Central Bank of Nigeria wishes to inform all authorised dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange Market: Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters window.”

This led to an immediate decline in the value of the naira. The local currency fell from its 471/$ to 770.38/$ as of last week Friday at the Investors & Exporters FX window, according to data from the FMDQ Exchange.

Meanwhile, the naira has continued to rise and fall on the Investors & Exporters’ window, worsening further in the parallel market and hitting N1000/$ last week.

Following the unification policy of the CBN, the DMO dumped the N460.35/$ rate it used in Q1 2023 and adopted N770.38/$.