Monday, November 27, 2017 09:27AM /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.
2. Eurobond and The Headache of Pricing Sovereign Instruments
3. Pricing of US$3bn Notes by Nigeria under its US$4.5bn Eurobond Programme
4. Bond Market opens firmly Bullish as the FGN Launches its $3bn Eurobond Offer to Investors
5. Eurobond: A Case Of Onshore-Offshore Arbitrage
6. Our Strategy Will Mitigate Debt Service Risk – FG
7. DMO: USD5.5 Billion Proposed External Capital Raising
8. FSDH Expects The Corporate Bond Market to Rebound
9. Nigerian T-Bill Boost to Bank Margins May Be Temporary
10. Job done by the DMO Yet Still More to do
11. Finally, a Positive Story to Share
12. Nigerian Bank Eurobonds a Step to Easing Foreign Currency Maturity Gaps
13. DMO Responds to Moody’s Sovereign Downgrade Rating on Nigeria
14. Moody's Downgrades Nigeria's Sovereign Issuer Rating to B2 With a Stable Outlook
15. States and the Rising Weight of Debt
16. The Nigerian Debt Debate: Deconstructing The Debt Story