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Stellar Ratios for External Debt

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Tuesday, March 20, 2018 09:01 AM / FBNQuest Research


The FGN’s external debt obligations at end-December amounted to US$18.91bn, equivalent to 5.1% of 2017 GDP. This includes the external borrowings of the state governments, which are necessarily guaranteed by the FGN. The rise over the previous quarter was US$3.56bn, dominated by the Eurobond issue of US$3.00bn in November. 

We also note increases in exposure of US$200m to the African Development Bank group, US$130m to the World Bank group and US$130m to Exim Bank of China. Nigeria’s traditional partners are still disbursing funds. 

The profile of the FGN’s external debt is changing, however. Commercial borrowings (Eurobonds and the small diaspora issue) now account for one-third of the total, compared with 21.5% in September 2017 and 14.0% in December 2015. The weaker exchange rate has been an additional factor. 

At the same time, the share of World Bank group loans has declined to 42.5% from 51.5% in September and 58.7% in December 2015. There are implications for external debt servicing costs, which we will quantify in one of our dailies shortly.  

The maturities of the FGN’s Eurobonds do not exactly match those of its naira bond issuance but we can say that the rates for its external borrowing are at least 650bps cheaper. 

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The DMO has a medium-term target for a 60/40 split of domestic and external obligations in what it terms Nigeria’s public debt: the domestic and external debt stock of the FGN and the state governments combined. At end-December, the ratio stood at 73/27 but is moving in the desired direction thanks to the latest Eurobond issue last month.  

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