Tuesday, October 31, 2017 9:05AM / FBNQuest Research
FGN’s domestic debt service payments have soared in line with issuance from
N354bn in 2010 to N1.20trn in 2016, and are set to continue their upward trend
due to its expansionary fiscal stance. We can see from our chart that service
of NTBs is steady while that of FGN bonds fluctuates with semi-annual coupon
outturn for H1 2017 shows that domestic payments accounted for 94% of total
debt service. Given the interest rate differentials and allowing for
devaluation risk, the strategy is to boost the external share of the FGN debt
The expansionary stance is set out most recently in the 2018-2020 Medium
Term Expenditure Framework and Fiscal Strategy Paper. This has total debt
service picking up from N1.66trn in 2017 to N2.03trn next year, N2.37trn in
2019 and N2.56trn in 2020.
The documents, as we have previously noted, have ambitious targets for
revenue collection. If these targets are met, the debt service/total revenue
ratio peaks at 37.5% in 2019 before easing fractionally the following year to
37.4%. In H1 2017 the figure was already 38.2% (vs a full-year target of
We have no quarrel with the FGN’s expansionary stance provides that it
generates growth, taxable employment and lasting infrastructural development.
The stance may well deliver but not at the pace sought by the authorities.
The four-year electoral cycle does not help. The next elections are due
in February 2019, and fiscal slippage ahead of polls is a well-documented
phenomenon in different forms in developed and developing economies.