Q1 2021 Debt Figure: A Good Reason for Higher External Debt Service

Proshare

Thursday, June 24, 2021 / 10:46 AM  / By United Capital Research / Header Image Credit: Freepik

 

The FGN's external debt service payments amounted to USD1.00bn in Q1 '21, a combination of USD760m and USD240m due to market and non-market creditors respectively. Once we exclude the FGN's decision to pay down the USD500m Eurobond maturing in January and therefore ease its debt profile, the burden is modest because about two-thirds of the debt stock is due to concessional lenders. This should not be a challenge for an oil producer generating revenue from its current quota of 1.55mbpd from the OPEC+ alliance and from condensates, which are exempt from quota. (The alliance is scheduled to meet next month and, given the steady pick-up in demand for crude, a further set of small monthly increases in quota appears likely.) An argument against external borrowing, most of all from the market, is that naira depreciation adds to the budget cost of servicing this debt. Budget Office data show that this more than doubled from NGN181bn in 2017 to NGN449bn in 2019.

 

Another argument against it was that interest rates were higher than for domestic borrowing. This was the case in late 2020.

 

The tables have since turned due largely to the huge domestic borrowing requirement in the market of NGN2.34trn this year. We now have a c.550bps differential in favour of external borrowing by the FGN for the longest maturities. The appetite of foreign portfolio investors for sovereign Eurobonds with a decent yield has been demonstrated by several issues out of Africa this year (Good Morning Nigeria, 23 June 2021). Some have been heavily oversubscribed (by four times in the case of Ghana).

 

Based upon annual interest and fee payments in the 12 months through to March, and the stock of external debt as at end-September, we calculate the average borrowing cost from the World Bank Group at 1.3%. Comparable figures for other creditors are 1.7% for the African Development Bank (AfDB) Group and 5.8% for Exim Bank of China. This last figure is higher than usual, which we can trace to heavy interest payments in Q4 '20 on its eleven separate listed project loans., 

 

Repayments of principal on non-market debt in Q1 totalled USD142m including USD62m to the World Bank Group and USD58m to Exim Bank.

 

Interest payments on market debt peak in the first and third quarters, which reflects the issuance calendar for Eurobonds with semi-annual coupons.

 

Total external debt service (FGN and states; USD millions)

Proshare Nigeria Pvt. Ltd.

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

 

Proshare Nigeria Pvt. Ltd.


Related News on Debts

  1. 37.67% of Nigeria's Total Public Debt Was External as of Q1 2021 - NBS
  2. Two-thirds of the FGN's External Debt Concessionary
  3. Q1 2021 Total Debt Figure: Moderate Risk of Distress Despite Rising Debt Level
  4. Public and FGN Domestic Debt Ratios under Control
  5. Nigeria's Total Public Debt Stood at N33.11trn as of March 31, 2021 - DMO
  6. Modest Burden of External Debt Service in Q4 2020
  7. A Rise in Domestic Debt Service in Q4 2020
  8. 38.60% of Nigeria's Total Public Debt Was External in Q4 2020 - NBS
  9. Q4 2020 External Debt Data: World Bank Heads the FGN's External Creditor List
  10. A Modest Increase in FGN Domestic Debt in Q4 2020
  11. Nigeria's Total Public Debt Stood at N32.92trn as of December 31, 2020 - DMO
  12. FGN's Domestic Debt Service on a Plateau, Totalled N604bn in Q3 2020
  13. A Small Rise in the FGN's Domestic Debt in Q3 2020
  14. Nigeria's Public Debt Stock as of September 30, 2020 Stood at N32.22trn
  15. External Debt Service Under Control 
  16. New Issuance, New Debt Service 
  17. External Debt Almost Two-thirds Concessionary 
  18. Nigeria's Total Public Debt Stood At N31.01trn in Q2 2020 - NBS 
  19. Nigeria's Public Debt Stock Stood At N31.01trn As of June 2020 
  20. External Debt Stock Flat in Q1 2020 
  21. Q1 2020: Debt Service Settled on a Plateau 
  22. Nigeria's Total Public Debt Stood At N28.63trn in Q1 2020 - NBS 
  23. Nigeria's Total Public Debt Stood At N27.40trn in Q4 2019 - NBS 
  24. Nigeria's Rising Debt Burden and How to Boost Revenue 
  25. Nigeria's Total Public Debt Stood At N26.14trn in Q3 2019 - NBS 
  26. Nigeria's Total Public Debt Stood At N25.70trn in Q2 2019 - NBS 
  27. Nigeria's Total Public Debt Stood At N24.97trn in Q1 2019 - NBS 
  28. DMO Releases Q1 2019 Public Debt Data - Marginal Increase of 2.3% in Total Public Debt Recorded 
  29. DMO Releases Public Debt Data for December 2018 
  30. Nigeria's Total Public Debt Stock Stood At $73.21bn or N22.43trn in Q3 2018 
  31. DMO Releases Public Debt Data for June 2018; FGN Domestic Debt Declines 
  32. Public Debt Vulnerable to Exchange Rate Movements 
  33. DMO Publishes Q1 2018 Debt Data; Total Public Debt Stood At N22.71trn or US$74.28bn 
  34. Total Public Debt as at December 31, 2017 Represents 18.20% of Nigeria's GDP for 2017 - DMO 

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP