April 14, 2020 /09:57 AM / by FBNQuest Research / Header Image
We see from the DMO's most recent quarterly release that the FGN's external debt obligations at end-December amounted to US$27.68bn, equivalent to 6.9% of 2019 GDP. (We convert at the then prevailing NAFEX rate.) The total increased by US$740m in the quarter.
Commercial borrowings were unchanged at US$11.17bn because the FGN has not tapped the Eurobond market since November 2018 and is unlikely to do so in a hurry. The total figure includes the external borrowing of the state governments of US$4.56bn, which is necessarily guaranteed by the FGN.
In terms of financing costs, we note that 59.7% 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-June (58.5%).
The Exim Bank of China has become a larger donor creditor than the African Development Bank (AfDB) Group: US$3.18bn vs US$2.29bn. New Chinese-funded projects are on the drawing board, not least for the railways.
Looking ahead, the 2020 budget provides for external financing of N850bn. The FGN's thinking was to raise the figure from a combination of donor partners for project support and the Eurobond market.
Global market turmoil as a result of the crashing oil price and coronavirus has removed an Eurobond issue as a credible alternative, leading the federal finance minister to appeal for support of US$6.9bn from the IMF, the World Bank and the African Development Bank.
FGN external debt by lender group, Sep 2019 (% shares)
Sources: Debt Management Office (DMO); FBNQuest Capital Research
This could increase the stock/GDP ratio by up to a further 170bps although it is worth noting that: the figure for the IMF would represent 100% of its quota; and the facility said to be sought from the IMF does not incorporate a Fund-supported programme or ex-post conditionality.