Blended External Debt Service for the FGN


Wednesday, July 29, 2020 / 08:59 AM / By FBNQuest Research / Header Image Credit: FDC


Total debt service on the FGN's external obligations amounted to US$473m in Q1 2020, consisting of US$263m and US$210m on market and non-market debt. This was US$116m above the comparable year-earlier period. The burden, which totaled US$1.33bn in 2019, should be comfortable for a country producing +/- 2.0mbpd crude in calmer days. The Covid-19 virus, the domestic lockdown, the weakness in the oil price and the production restraint of OPEC+ are all negatives for Nigeria's debt sustainability. That said, we still regard the burden as manageable.


Based upon annual interest and fee payments in the 12 months to March 2020 and the stock of debt as at end-September, we calculate the average borrowing cost from the World Bank Group at 1.1%, the African Development Bank Group at 2.0% and Exim Bank of China at 2.8%. For the FGN's commercial obligations, the average works out at 7.5%.


If we put fx risk aside, it remains the case that external debt is less costly to service than domestic even when we allow for the sharp fall in rates on FGN bonds and NTBs.


Principal repayments in Q1 2020 amounted to US$115m, principally to the World Bank Group and Exim Bank of China. The FG's next Eurobond maturity is US$500m due in January 2021. Its formal position is that it will not tap this market for financing of the 2020 budget deficit. 


The FGN has declined the G20 offer of the deferment of bilateral debt service due this year. It was apparently guided by the suggestion that it should seek “comparable treatment” from private creditors such as holders of Eurobonds. The ratings agencies made anxious comments about such treatment.


Total external debt service (FGN and states; US$ millions)


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



Nigeria's bill for bilateral debt service in 2019 was just US$170m.


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