External Debt More Than 50% Concessional

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Monday, July 15, 2019  / 09:12AM / By FBNQuest Research / Header Image Credit: allAfrica.com

                                                                                     

The FGN’s external debt obligations at end-March totaled US$25.61bn, equivalent to 6.1% of 2018 GDP. This includes the external borrowings of state governments, which are necessarily guaranteed by the FGN and stood at US$4.23bn at end-December. The debt stock increased by just US$340m over the quarter. There was no new commercial borrowing in Q1: the small rise was accounted for by increases of US$230m and US$80m in outstanding obligations to the World Bank Group and Exim Bank of China respectively.                                                                                                     

From a financing perspective, it is worth noting that 56.4% of the debt stock is still due to multilateral and bilateral creditors on concessional terms. The ratio was 55.8% at end-December.

The 2019 budget projects external financing of N840bn (US$2.75bn at the CBN rate of N306). The objective is to boost the non-market share of the external debt stock by seeking budget loans from the likes of the World Bank and African Development Bank (AfDB).

As a pointer, we note that the FGN went down this route in 2015 and 2016 but failed to secure any credit from the World Bank and had only limited success with the AfDB. It ran into the roadblock of policy conditionality on a range of issues.

 

FGN external debt by lender group, Mar 2019 (% shares) Total: US$25.61bn

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

 

We like to make parallels with Egypt from a sovereign credit perspective. It has a US$12bn three-year credit arrangement with the IMF and has recently removed fuel subsidies within its attached reform programme. In contrast, the FGN has never borrowed from the Fund, and the presidency supports the retention of such subsidies.

 

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