Wednesday, February 10, 2016 09:15 AM / FBNQuest Research
The latest report from the DMO shows FGN domestic debt at N8.84trn (US$44.9bn) at end-December, equivalent to 8.9% of estimated 2015 GDP. When we add the federal government’s external debt, we arrive at a burden representing 11.0% of GDP. In the emerging market universe, and particularly in the context of comparable oil producers, this indebtedness is modest.
The projected net borrowing in the FGN’s 2016 budget proposals would increase the stock by a further 1.8% of GDP. The preliminary conversations with the World Bank and the African Development Bank on budget support (Good Morning Nigeria, 02 February 2016) are therefore no cause for alarm.
The data from the DMO, which appear to have been moved to a semi-annual reporting cycle, show increases of N440bn for the total burden over the six months (and of N510bn for FGN bonds). This follows the FGN’s rescue plan in which the bank borrowings of most state governments were converted into federal long bonds (the Jul ‘34s).
An estimate of total public debt would have to include the naira bonds and residual bank borrowings of the states, the obligations of the NNPC, AMCON and other public agencies, the arrears due to contractors and contingent liabilities such as guarantees.
Under an implausible worst case scenario, assuming for example that AMCON makes no further recoveries, the burden could rise to a manageable 25% of GDP.
These metrics underpin Nigeria’s sovereign credit ratings (BB- from Fitch and the equivalent from Moody’s), and B+ from S&P.