A Healthy Ratio for the Public Debt Stock


Friday, January 24, 2020 09:35 AM / FBNQuest Research / Header Image Credit: FBNQuest


The FGN's domestic debt stock amounted to N13.90trn (US$38.4bn) at end-September, equivalent to 10.9% of 2018 GDP. The total increased by N490bn in the quarter: the stock of FGN bonds grew by N380bn and the FGN's obligations on promissory notes by N100bn.


These are notes securitized to clear FGN arrears to contractors, oil marketers and state governments. This burden could reach as much as N2.7trn (from N810bn) on the verification of claims by the DMO and the National Assembly although the process injects cash into the real economy.


The stock has increased by 13% y/y largely because the FGN has not borrowed in fx in the market since November 2018. It has set itself a target of a 60/40 split between its domestic and external borrowings (including the states). The blend was 69/31 in September.


Total public debt at end-September reached N26.21trn according to the DMO's measure, equivalent to 20.5% of GDP. This includes 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 convention, the data do not cover the CBN's issuance of NTBs within its open market operations.


This debt stock/GDP ratio compares very well with peer EMs. Public debt in Kenya at end-September totaled KES5.97trn, equivalent to 67% of 2018 GDP. The Kenyan government has been an active issuer on the Eurobond market to fund large infrastructure projects.


FGN domestic debt (N trn)

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



The ratios for debt service, however, are challenging due to Nigeria's poor revenue generation. More than 50% of the FGN's revenue inflows are consumed by debt service although the ratio is improving.


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