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External Debt Stock Flat in Q1 2020

Nigeria Economy	1010 VIEWS
Nigeria Economy
1010 VIEWS

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Tuesday, July 14, 2020 / 09:50 AM / by FBNQuest Research / Header Image Credit: Global Finance Magazine

We see from the DMO's most recent quarterly release that the FGN's external debt obligations at end-March amounted to US$27.67bn, equivalent to 6.9% of 2019 GDP. (We convert at the then prevailing NAFEX rate.) The total was broadly flat on the quarter. Commercial borrowings were again US$11.17bn because the FGN has not issued Eurobonds since November 2018. It has pledged not to do so in the current budget year. The crashing of rates on naira debt instruments has weakened the case for externalization (deploying Eurobond proceeds to pay down NTBs).

In terms of financing costs, we note that 59.6% of the external debt stock is due to multilateral and bilateral creditors, principally the World Bank Group, on concessionary terms. The ratio was little different at end-December (59.7%). It will have increased sharply in Q2 following the disbursement of US$3.4bn by the IMF within its rapid financing instrument.

Within the 2020 budget the FGN projects external borrowing of US$5.5bn. Beyond the loan from the Fund and US$290m approved by the African Development Bank (AfDB) out of US$500m requested, it hopes to secure multilateral loans from the World Bank and others.

The Exim Bank of China has become a larger donor creditor than the AfDB Group: US$3.12bn vs US$2.27bn. New Chinese-funded projects are on the drawing board, not least for the railways.

FGN external debt by lender group, Sep 2019 (% shares)

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

The DMO has started to share data covering external loans approved but not yet disbursed, and those disbursed in part. For the first category, we find a total of US$1.26bn and JPY2.3bn for Exim Bank of China including one signed as long ago as April 2016. For the second, there are no fewer than 47 separate loans from the World Bank's International Development Association that have been partly released. The amount undisbursed (US$4.48bn) would represent disbursed 16% of the FGN's external debt stock.