Coronanomics (14) - Nigeria's Debt Profile - Swimming in Deep Waters

Proshare

Saturday, June 20, 2020 / 06:00 AM / by Proshare Content/ Header Image Credit:  EcoGraphics

 

The latest debt data released by the Debt Management Office (DMO) shows that the country's total debt stock as of December 2019 stood at N27.4trn. The debt includes N21.7trn owed by the Federal Government and the N5.6trn owed by the different state governments.

  • The Federal Government's debts accounted for 79.59% of the country's total debt, while the states and the FCT government debt accounted for the remaining 20.41%.
  • Foreign debt accounted for 32.93% of the total debt at N9.02trn, with the Federal Government owing N7.53trn and the state governments owing N1.48trn.
  • Domestic debts accounted for the remainings 67.07%. The Federal Government had a domestic debt portfolio of N14.2trn, accounting for 52.09% of total debt stock, while the states owed N4.1trn, 14.99% of the total debt stock.

Nigeria's mounting debt stock is a major source of worry as the country carries $900bn worth of dead capital by way of the idle physical property and agricultural land. Nigeria's total debt has been increasing but factor productivity growth has slumped. The fall in productivity has meant that the Federal Government's borrowings have not added significantly to economic value. The country's debt service has continued to be a noose around its fiscal neck. Recent debt service figures suggest that the country's debt service obligation in Q1 2020 swallowed up 99.2% of the quarter's fiscal revenue. The government's response so far has been to borrow more money. To be sure digging deeper while inside a hole is not the smartest way to escape a ditch (see chart 32).


Chart 32: Nigeria's Total Debt (N'trn) 2015-2019

Proshare Nigeria Pvt. Ltd.

Source: DMO, Proshare Research 

 

Nigeria's External Debt

The coronavirus pandemic will most likely worsen Nigeria's external debt position in 2020 e.g IMF recently approved Nigeria's request for emergency financial assistance of $3.4bn under the Rapid Financing Instrument (RFI) to cover financial emergencies created by the COVID-19 pandemic. Giving the fall in its oil revenue, the need to expand health infrastructures and its huge budget size, the need to seek external debt to bridge its revenue gap becomes inevitable.

 

Nigeria's external debt trended upwards from December 2015 to December 2019. Nigeria recorded an external debt of $27.68bn in December 2019, the highest recorded since it paid off Paris Club debt in 2006. Nigeria's external debt increased from $10.72bn in December 2015 to $27.68bn in December 2019, a growth of about +158.21%. Plausible reasons for the increase in the external debts include lower oil prices, disproportionate spending and defence of the exchange rate. The categories of the debt owed fall under Multilateral, Bilateral and Commercial loans (European and Diaspora bonds). While Nigeria's external debt to GDP remains under 10% and well below global benchmarks, the debt service commitment of about $1.5bn at the current debt levels is worrisome.

 

Chart 33: Nigeria's External Debt (N'bn) 2015-2019

Proshare Nigeria Pvt. Ltd.

Source: Proshare Research, DMO

 

Some economic experts have argued that these borrowings are necessary given the fall in oil revenues and the huge infrastructural deficit needed to propel economic growth. While other economic analyst argued that the increase in the external debt makes the Nigerian economy vulnerable to external shocks. Their argument stems from the fact that Nigeria's external debt levels of $27.68bn is about 75% if external reserves, the highest since 2005. Unlike in previous economic crisis in 2009 and 2016, Nigeria's external reserves may not provide the buffer it requires in 2020. CBN is committed to billions of dollars in forex forward sales and has seen foreign demand for its bills dwindle. Without an uptick in crude oil prices and sales, reserves may fall below $30bn reducing the cover to external debt to below 100%.


To cope with the coronavirus pandemic, economic experts have recommended a more flexible exchange rate to relieve the pressure on the external reserves, which could lead to a fall in the exchange rate before becoming stable.

 

Nigeria's Domestic Debt

The yearly increase in Nigeria's domestic debt is a major source of concern giving the yearly corresponding rise in its external debt. A major reason for the rise in domestic debt can be attributed to dwindling oil prices and shifting of emphasis to domestic rather than external debt due to foreign exchange translation costs. Since the beginning of the year, Federal Government's bonds have been oversubscribed indicating that there is sufficient liquidity in the domestic market to absorb additional domestic debt, the cost of which is the crowding out of the private investment. Nigeria's domestic debt grew by +62.5% from December 2015 to December 2019. Its domestic debt rose from N8.8trn in December 2015 to N14.3trn in December 2019. It is projected that the domestic debt will rise further in 2020, as a result of coronavirus.

 

Chart 34: Nigeria's Domestic Debt (N'bn) 2015-2019

Proshare Nigeria Pvt. Ltd.

Source: DMO, Proshare Research


Proshare Nigeria Pvt. Ltd.

 

Related Reports (PDF)

1.     Download the Full PDF Report - Coronanomics and the Nigerian Economy, June 06, 2020

2.     Executive Summary PDF - Proshare, June 06, 2020

 

Proshare Nigeria Pvt. Ltd.


Related News

1.      Coronanomics (13) - Nigeria: The Budget, The People and Poverty

2.     Coronanomics (12) - The Nigerian Economy in Relief

3.     Coronanomics (11) - Fighting A Virus - Africa's Equity Market

4.     Coronanomics (10) - Impact on the Travel and Tourism Sector

5.     Coronanomics (9) - China, US-Africa Bilateral Trade Data - Changing Partners

6.     Coronanomics (8) - African Economies - An Emerging Market Fight Back

7.     Coronanomics (7) - Global Policy Responses Against the Negative Impact of COVID-19

8.     Coronanomics (6) - Global Stock Market - Top 3 Decliners Dipped By 0ver 26% YTD

9.     Coronanomics (5) - Global Oil Market - Spinning Around A Vortex

10.  Coronanomics (4) - Chinese Economy and The Rest of the World

11.   Coronanomics (3) - The Global Economy Spinning on a Wishing Wheel

12.  Coronanomics (2) - Easing Out of a Crisis

13.  Coronanomics (1) - Understanding the Realities of an Impending Recession


Related Links and References

Related News - Opinions & Analysis

  1. An African Perspective on the impact of COVID-19 and the Response to it - FBNQuest
  2. Corporate, Financial Institution Downgrades On Pace for Record
  3. The Case Against High Interest Rates in Time of Contagion - Bola Tinubu
  4. The Coming Greater Depression of the 2020s
  5. Why the Global South Should Temper Expectations Over The Basel Convention Ban Amendment
  6. Of Q1'20 Economic Output and GDP Forecasts - Lessons from China
  7. Of Q1'20 Economic Output and GDP Forecasts - Lessons from China
  8. It's Time to Build - OpEd
  9. What Would the World Look Like after Coronavirus: Economically, Politically and Socially?
  10. Risk-Weight Variation Among Emerging Markets Banks Impedes Capital Comparisons

 Proshare Nigeria Pvt. Ltd.

Related News - Reviews and Outlooks

  1. Coronavirus Crisis Impact on Jobs Could Outweigh GDP Impact
  2. Moody's Affirms Nigeria's B2 Ratings, Maintains Negative Outlook
  3. Fitch Revises Outlook on Kaduna State to Negative on Sovereign Rating Action; Affirms at 'B'
  4. Fitch Downgrades Lagos State to 'B' on Sovereign Rating Action; Outlook Negative
  5. Further Multi-Notch Sovereign Downgrades Are Probable in 2020
  6. Various Rating Actions On Nigerian Banks By S and P Following Sovereign Downgrade; Outlooks Stable
  7. Three Ratings Agencies, Now One Message
  8. Fitch Downgrades Nigeria to 'B'; Outlook Negative
  9. Nigerian Banks at Severe Risk from Oil Price Slump, Coronavirus
  10. Moody's Assigns Ratings to Dangote Cement Plc's DMTN Program and Proposed Series 1 Notes
  11. Macroeconomic Review Q1 2020: Steering a Fragile Economy in the Face of Uncertainties
  12. Fitch Downgrades 3 Nigerian Banks to 'B', Places All 10 Banks on Negative Watch
  13. Nigeria Long-Term Rating Lowered To ''B-'' On Weakening External Position
  14. Coronavirus to Weaken Sovereign Fiscal Positions; Track Record Matters
  15. Fiscal Space Limited for Many Sovereigns
  16. Rating Actions Taken On Several Corporate Issuers With Exposure To Nigeria
  17. Outlooks On Six Nigerian Banks Revised To Negative After Same Action On Sovereign
  18. Nigeria's Outlook Revised To Negative On Falling Foreign Exchange Reserves

 Proshare Nigeria Pvt. Ltd.


Related News - Nigeria Economy    

1.       COVID-19 and the Construction Sector

2.     The Lockdown - Food Scarcity and Social Unrest Looming

3.     April 2020 Headline Inflation Will Cross 13.0% - FDC

4.     Nigerian Economic Update: A Throw of the Dice

5.     Guidelines and Recommendations: Reopening the Nigerian Economy

6.     GDP By Income and Expenditure Approach Q4 2019 - Household Final Consumption Declined by -2.40%

7.     Ahead of Tomorrow on WebTV: Discussions on COVID-19; Reinventing Nigeria's Economy

8.     Nigeria Weekly Update: Short and Long Currency Cycles

9.     Nigeria Needs A National Strategy To Integrate Factor Endowment Into A Plan - Prof. Utomi

10.  A Surprising Boost to the FAAC Payout; April Payment Amount to N781bn

11.   Ahead of Tomorrow on WebTV: Discussions on Repositioning Nigeria's Economy Beyond COVID-19

12.  Impact of Privatization on Nigeria's Economy

13.  Can Africa Afford COVID-19 Lockdowns? - Chukwuma Soludo

14.  COVID-19; Nigeria Needs To Relax Foreign Exchange Management To Boost Industrialization - Dr. Yusuf

15.  Nigeria's Economy After Oil: How Should We Prepare?

16.  The Disruptive Impact of COVID-19

17.  Nigeria's Impending Recession

18.  Roadmap to Rebooting Nigeria's Economy from COVID-19

19.  Coronation Weekly: Interest Rate Conundrum

20. Headline Inflation Increases By 12.26% YoY In March 2020; 0.06% Higher Than February 2020 Rate

21.  Ahead of Tomorrow On WebTV: COVID-19 and The Strategic Implications to Business Planning

22. #Coronanomics: The Changing Scale of Edtech, Healthtech, and Virtual Work Space In Nigeria


Related Reports/Articles

1.      COVID-19 and AGM by Proxy: Lessons from GTBank Approach

2.     #Coronanomics: How Tech Businesses Can Sustain Productivity

3.     The End of an Epoch: A New Beginning for Capital Markets in the 21st Century - Bruce Fenton

4.     Nigeria's Post COVID-19 Economic Outlook - Economics Associates

5.     Which Emerging Markets Are in Most Financial Peril?

6.     Global Monthly - World Bank Group

7.     World Economic Outlook 2020 - The Great Lockdown

8.     COVID-19: Economic, Tax and Other Fiscal Stimulus Measures in Nigeria

9.     COVID-19: Crisis And Opportunity

10.  COVID-19: Nigeria Economic Impact and Implications for CPG - McKinsey and Company

11.   The Economics of a Pandemic: The Case of COVID-19 - London Business School

12.  The Impact of The COVID-19 Pandemic in Nigeria - UNDP Nigeria


Proshare Nigeria Pvt. Ltd.


Coronanomics Discourse-WebTV Videos

1.      Social Bonds: A Viable Way For The Capital Market Support To Nigeria's Economy Post COVID-19 - Patrick Ezeagu

2.     COVID-19: Time For Nigeria To Diversify Its Revenue Base Through Agro, ICT - Ayuli Jemide

3.     Post COVID-19: Nigeria Must Prioritize Agro and Manufacturing, To Drive Productivity - Ray Echebiri

4.     Post COVID-19: States Should Rethink Their Economic Models To Drive Productivity - Teslim Shitta-Bey

5.     Economy & Politics: Nigeria Needs a Post COVID 19 Long-Term Plan - Boason Omofaye

6.     Economy and Politics: Nigeria Needs Economic Pragmatism and Robust Institutions - Dr. Temitope Oshikoya

7.     Economy and Politics: How Nigeria Can Address Its External Illiquidity - Ayo Teriba

8.     Economy and Politics: Nigeria Must Deregulate Its Petroleum Sector Post COVID 19 - Boniface Chizea

9.     Market Review: Transparency in Economic Management Key to Nigeria's Stability Amidst COVID 19 - Pandemic - Gbite Oduneye

10.  Economy and Politics: Coordinated Policy Key to Effective Nigerian COVID 19 Tax and Fiscal Stimulus - Yomi Olugbenro

11.   Market Review: FG Should Explore Tax Breaks and Other Incentives o Curtail Massive Job Losses - Tunji Andrews

12.  Market Review: Businesses Need to Reassure Their Customers Through A Well-Structured Communication Strategy - Dr. Tunji Olugbodi

13.  Economy and Politics: Nigeria Needs to Invest in Agro-Industrial Parks, To Boost Manufacturing - Femi Awofala

14.  Market Review: States Need Integrated Economic Policies Post COVID 19 - Teslim Shittabey

15.  Economy and Politics: Advertising Agencies Need Service Providers to Boost Communications Post COVID 19 - Lolu Akinwunmi

16.  Economy and Politics: Government and Businesses in Nigeria Need to Invest More in Digital Technology - George Ashiru

17.  Market Review: Nigeria Needs a Robust Regulatory Framework for Virtual AGMs - Bayo Olugbemi

18.  Market Review: Nigeria Must Deploy Data to Effectively Mitigate COVID 19 Risks - Babajide Ogunsanwo

19.  Market Review: Investments in Storage Facilities and Packaging Key for Nigeria's Agro Sector - Ade Adefeko

20. Market Review: Deregulation of Downstream Sector, Way Forward for Nigeria - Olugbenga Odusanya

21.  Economy and Politics: CBN Should Reduce the CRR and MPR - Marcel Okeke

22. Economy and Politics: Insurance Should be Integrated into Nigeria's COVID 19 Fiscal Measures - Ekerette Ola Gam-Ikon

23. Market Review: COVID 19, An Opportunity for Companies to be Empathetic to Consumers - Lampe Omoyele

24. Economy and Politics: Nigeria must Drive a Harmonized Tax Plan Post COVID 19 - Taiwo Oyedele

25. Market Review: Governance in Nigeria Should Consider Process, Accountability and Transparency Post COVID 19 - Soji Apampa

26. Market Review: FG Should Integrate the Capital Market in its Economic Sustainability Plan - Charles Fakrogha

27. Economy and Politics: Liquidity, Titling and Tech Adoption, Key for Growth of Real Estate in Nigeria - Hakeem Ogunniran

28. Economy and Politics: Why Nigeria Should Explore a N20trn Development Bond - Tope Fasua

29. Market Review: Nigeria Needs More Project Based Funds to Attract Investments - Ebo Ayodeji

30. Market Review: NIPC Working with States to Boost Their Attractiveness for Investments - Yewande Sadiku

31.  Economy and Politics: Nigeria Fintech Industry Attracted About $50m Investments in Q1,2020 - Babatunde Obrimah

32. Nigeria Needs to Align its National Database to Deepen Social Investments - Laoye Jaiyeola

33.   Post COVID 19: Time for Nigeria to Restructure its Fiscal Framework - Zeal Akaraiwe

 

 Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP