The Institute of International Finance (IIF), a prominent global trade association, has revealed that the world’s total Debt has soared to an unprecedented $307 trillion during the second quarter of 2023. This remarkable record-breaking debt level was achieved despite widespread increases in interest rates across the globe, with influential markets like the United States, Japan, the UK, and France driving this substantial rise.
This alarming revelation comes on the heels of data released by the National Bureau of Statistics, indicating that Nigeria’s public Debt, which includes both external and domestic Debt, surged to N87.38 trillion ($113.42 billion) in the second quarter of 2023, marking a staggering 75.27 percent quarter-on-quarter growth rate, up from N49.85 trillion ($108.30 billion) in Q1 2023.
Breaking down Nigeria’s Debt further, the report reveals that the country’s total external Debt stood at N33.25 trillion ($43.16 billion) in Q2 2023, while total domestic Debt amounted to N54.13 trillion ($70.26 billion).
According to the IMF’s global debt monitor report, published on Tuesday, the world’s debt load escalated by $10 trillion in the first half of 2023 and a whopping $100 trillion over the past decade. This surge has pushed the global debt-to-GDP ratio to 336 percent for a second consecutive quarter, signaling a reversal of the seven-quarter decline in the debt ratio that occurred before 2023.
The report attributes this rise in the debt ratio to slower economic growth and a deceleration in inflation. It underscores that the sudden surge in inflation played a pivotal role in reducing the debt ratio over the past two years.
“The sudden rise in inflation was the main factor behind the sharp decline in debt ratio over the past two years,” the IIF said.
The IIF anticipates that, with moderating wage and price pressures, although not necessarily to target levels, the debt-to-output ratio is poised to exceed 337 percent by the close of 2023. This situation raises concerns about countries allocating a growing portion of their budgets to servicing interest expenses, with far-reaching implications for funding costs and debt dynamics.
Emre Tiftik, the lead author of the IIF’s report, expressed apprehension about these trends, stating, “Our concern is that countries will have to allocate more and more to interest expenses. It will have long-term implications for countries’ funding costs and debt dynamics.”
It’s worth noting that the previous record for global Debt was set in early 2022, just before central banks worldwide initiated aggressive interest rate hikes as a response to mounting inflationary pressures.
In Nigeria, the Monetary Policy Committee of the Central Bank of Nigeria has consistently raised the Monetary Policy rate due to persistent inflation, which reached 25.80 percent in August 2023.
At the sub-national level in Nigeria, Lagos State held the highest domestic Debt in Q2 2023, totaling N996.44 billion, followed by Delta with N465.40 billion. Conversely, Jigawa State recorded the lowest domestic Debt with N43.13 billion, trailed by Kebbi with N60.94 billion.
Lagos State also reported the highest external Debt, amounting to $1.26 billion, followed by Kaduna with $569.38 million. Borno State held the smallest external Debt, with $18.75 million, while Taraba recorded $21.92 million in external Debt.