Culled—Proshare

September 11, 2020

by FBNQuest Research 

The FGN’s domestic debt stock increased to N15.46trn (US$40.0bn) at end-June, equivalent to 10.7% of 2019 GDP. The total rose by N930bn in the quarter according to the DMO’s timely update, and the stock of FGN bonds by N680bn over the period. It has stepped up its sales of the bonds at monthly auction, having been mandated to raise N1.6trn this year solely from the domestic market rather than from a combination of external and domestic sources. Over the quarter there were also increases in the stock of sukuk and NTBs of N160bn and N110bn respectively.                                                                                              

Total public debt at end-June reached N31.01trn (US$80.2bn) according to the DMO’s measure, equivalent to 21.5% of GDP. This covers the domestic and external obligations of the three tiers of government.

If we add AMCON bonds (although they are held by the CBN), 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. Also, most data series for public debt (including the DMO’s) exclude the obligations of central banks.

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.

FGN domestic debt (N trn)

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

The DMO has thoughtfully reminded us of the pressures on the stock of domestic debt in the months ahead. It pointed to its adjusted funding target within the 2020 budget, the FGN’s current soft loan negotiations with three multilateral agencies (led by the World Bank) and its programme of securitizing arrears to non-oil exporters, contractors and oil marketers. At end-June such promissory notes outstanding totaled N950bn.