The FGN and the outstanding public debt remain manageable



Monday, September 20, 2021 / 1:44 p.m. / by FBNQuest Research / Header image credit: Zenith

We saw on Friday in the FGN’s investor presentation for the current Eurobond issue that its domestic debt stood at NGN 17.63 billion (USD 42.8 billion at I&E / NAFEX rate) at the end of June. , or 10.9% of 12 million GDP in Q2 ’21. The charge increased by NGN 1.12 billion in three months, including NGN 780 billion for FGN bond stock and NGN 390 billion for BNT. Bond issuance has skyrocketed as the DMO pursues its national funding target of NGN 2.34 billion for the full year. In eight months, he raised NGN 1.91 billion from the bond auction, including non-competitive bids from government agencies, and small amounts of other debt instruments. It therefore seems well placed to achieve its objective even if we are awaiting clarification on the modalities of financing the additional budget of 1.0trn NGN.

The FGN bonds and the NTBs together represent 92% of the total outstanding debt. With the exception of the sukuk, the DMO’s track record in launching new debt instruments has been poor.

The investor presentation places the public debt at 21.6% of GDP in 2020. This measure covers the debt of the FGN and state governments, both domestic and external. The ratio compares very favorably to African peers, for which the data in the presentation is taken from the IMF’s World Economic Outlook and may not be strictly comparable: 127.1% for Angola, 78.0% for Ghana and 68.7% for Kenya.

Nigeria’s ratio will of course increase strongly enough in the DMO report for the third quarter of 21 to reflect the impending Eurobond issuance. The contribution of state governments other than a Lagos state issuance program is unlikely to change much as sub-nationals are under acute fiscal pressure and will have difficulty finding willing lenders.

The public debt ceiling has been raised by the DMO from 25% to 40% of GDP. This leaves sufficient leeway for the proposed securitization of the CBN FGN’s way and means advances, estimated last year at NGN 10,000 but increasing, and other new borrowings.

The revised DMO strategy for 2020-2023 also foresees a new ceiling for sovereign guarantees of 5% of GDP. This is an area that the FGN wishes to develop for the financing of infrastructure.

If we expand the measure of public debt to cover bonds issued by AMCON (all held by CBN) and bonds of public agencies such as NNPC, the burden would not exceed 30% of GDP. The weak points in the Nigerian debt history are the ratio of debt service to FGN income and the impact of borrowed funds on development.

FGN domestic debt (tn NGN)

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Sources: Debt Management Office (DMO); Federation Budget Office; Fundraising FBNQuest

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Related news on debts

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  2. DMO responds to media publication listing Nigeria and nine other high debt risk countries
  3. Nigeria on the brink of debt abyss: Naira 1.8 billion spent on debt service in first five months of 2021
  4. First Quarter 2021 Debt Data: Domestic Debt Service on a Plateau
  5. Total debt figure for the first quarter of 2021: moderate risk of distress despite rising debt levels
  6. 37.67% of Nigeria’s total public debt was external in the first quarter of 2021 – NBS
  7. Two-thirds of the FGN Concessionaire’s external debt
  8. Total debt figure for the first quarter of 2021: moderate risk of distress despite rising debt levels
  9. Public and FGN domestic debt ratios under control
  10. Nigeria’s total public debt stood at 33.11 billion naira as of March 31, 2021 – DMO
  11. Modest external debt service charge in the fourth quarter of 2020
  12. An increase in domestic debt service in the fourth quarter of 2020
  13. 38.60% of Nigeria’s total public debt was external in Q4 2020 – NBS
  14. Fourth quarter 2020 external debt data: World Bank tops FGN’s list of external creditors
  15. A slight increase in the FGN’s domestic debt in the fourth quarter of 2020
  16. Nigeria’s total public debt stood at 32.92 billion naira as of December 31, 2020 – DMO

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  14. Budget and national strategy: potential for leverage and synergy
  15. Lagos State Budget 2021: Rekindling Hope, Riding Expectations
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