New Issuance, New Debt Service

Tuesday, September 15, 2020 / 12:29 PM / By FBNQuest Research / Header Image Credit: FBNQuest

The latest data release by the DMO shows us that the FGN's domestic debt service totaled N313bn in Q2 2020, compared with the year-earlier figure of N215bn. The quarterly costs had stabilized but we can trace the increase to the semi-annual coupon payments on the 14.55% Apr '29s and the 14.80% Apr '49s that were issued in April 2019. Issuance continues to pick up because the DMO is required to raise N1.60trn (gross) from domestic sources towards the financing of the 2020 budget deficit, and because the monthly bond auctions are the largest source.

That budget projects domestic debt service payments of N1.87trn this year (excluding sinking fund transactions). The H1 figure of N920bn suggests that the projection is at best sound.

Falling rates obviously favour the FGN, and the outcome for the full year may still come in ahead of target. If we take a mid-curve bond such as the Mar '27s, we see that the average yield in the market has narrowed from 14.4% in Q2 2019 to 10.8% in Q2 2020. The decline over the same period for the 364-day NTB at auction has been far sharper, from 14.3% to 4.0%.

Analysts focus on debt service in Nigeria because of the pitiful record for revenue generation. The latest outturn (2019) gives us a ratio of 51.2% for total debt service/total inflows. The official projections show an improvement to 48.3% this year. The double blow of the Covid-19 virus and the plunging oil price will surely bring lower, not higher revenue collection.

Domestic payments accounted for 79% of total debt service in 2019.

Despite this latest increase, the payments peak in the first and third quarters, when the issuance of FGN bonds is concentrated.

Related News

1. External Debt Almost Two-thirds Concessionary
2. Nigeria's Total Public Debt Stood At N31.01trn in Q2 2020 - NBS
3. Nigeria's Public Debt Stock Stood At N31.01trn As of June 2020
4. External Debt Stock Flat in Q1 2020
5. Q1 2020: Debt Service Settled on a Plateau
6. Nigeria's Total Public Debt Stood At N28.63trn in Q1 2020 - NBS
7. Nigeria's Total Public Debt Stood At N27.40trn in Q4 2019 - NBS
8. Nigeria's Rising Debt Burden and How to Boost Revenue
9. Nigeria's Total Public Debt Stood At N26.14trn in Q3 2019 - NBS
10. Nigeria's Total Public Debt Stood At N25.70trn in Q2 2019 - NBS
11. Nigeria's Total Public Debt Stood At N24.97trn in Q1 2019 - NBS
12. DMO Releases Q1 2019 Public Debt Data – Marginal Increase of 2.3% in Total Public Debt Recorded
13. DMO Releases Public Debt Data for December 2018
14. Nigeria's Total Public Debt Stock Stood At $73.21bn or N22.43trn in Q3 2018
15. DMO Releases Public Debt Data for June 2018; FGN Domestic Debt Declines
16. Public Debt Vulnerable to Exchange Rate Movements
17. DMO Publishes Q1 2018 Debt Data; Total Public Debt Stood At N22.71trn or US$74.28bn
18. Total Public Debt as at December 31, 2017 Represents 18.20% of Nigeria's GDP for 2017 - DMO
19. Nigerian Public Debt - A Comparative Analysis