Culled—Proshare
November 27, 2017/FBNQuest Research
The FGN’s external debt obligations at end-September amounted to US$15.35bn, equivalent to 3.9% of 2016 GDP. The increase over Q3 amounted to just US$300m, consisting largely of disbursements by the soft loan windows of the World Bank and the African Development Bank, and by the agence française de développement (the French state investment bank).
The point to be made, amid some uninformed commentary about the FGN’s return this month to the Eurobond market to raise US$3.0bn, is that concessional loans are still available.
The external debt stock of Angola, which has also been downgraded by Moody’s to B2, was an estimated 42% of GDP in 2016.
If we annualize interest and fee payments made on Nigerian external debt in Q3, we arrive at external debt service of 4.3% on the basis of mid-2017 stocks.
To make the same point differently, OAGF data for H1 2017 show domestic and external interest payments by the FGN of N872bn and N56bn respectively.
The FGN has tapped the Eurobond market again to cover the larger part of its 2017 external borrowing target. If it is to tackle the structural flaws of the Nigerian economy, it has to borrow because transforming its non-oil revenue collection is at best a medium-term project. For reasons we have indicated and others, it make sense to borrow externally.
The FGN’s next step is the externalization of longer-tenor NTBs up to a ceiling of US$3.0bn, which has been approved by the National Assembly.