Culled—Proshare

April 1, 2020

By FBNQuest Research        

The latest quarterly data release from the DMO puts the FGN’s domestic debt stock at N14.27trn (US$39.1bn) at end-December, equivalent to 9.9% of 2019 GDP. The total increased by N370bn in the quarter, and the stock of FGN bonds by N450bn to reach N10.52trn. It includes N730bn in promissory notes issued to clear FGN arrears to contractors, oil marketers and state governments. This figure could reach as much as N2.7trn on the verification of claims. Additionally, there is now talk of securitizing the FGN’s ways and means advances from the CBN.                  

One reason for the increase of N1.50trn in the domestic debt stock over 12 months is that the FGN has not borrowed in fx in the market since November. Plans to tap the Eurobond market this quarter have been shelved due to market turbulence.

Total public debt at end-December reached N27.40trn according to the DMO’s measure, equivalent to 19.0% of GDP. This covers all the obligations of the three tiers of government. If we add AMCON bonds, and the debt of the NNPC and other public agencies, we should still be a little below 30% of GDP. In line with established practice, the data do not cover the CBN’s issuance of NTBs within its open market operations. Most, but not all, data series exclude all obligations of central banks, like the DMO.

This debt stock/GDP ratio compares very well with peer EMs. Public debt in Kenya, for example, represented 61.1% of GDP in June 2019 according to the National Treasury.

FGN domestic debt (N trn)

Sources: Debt Management Office (DMO); FBNQuest Capital Research

The weakness of Nigeria’s story is its burden of debt service. The 2020 budget, which is being reworked due to the crashing oil price, has total debt service at 31.1% of total FGN revenue. The outturn is set to be rather worse.