Tuesday, July 07, 2020 / 09:50 AM / by
FBNQuest Research / Header Image Credit: Business Day
The latest quarterly data release from the DMO puts the FGN's domestic debt stock at N14.53trn (US$37.7bn) at end-March, equivalent to 10.1% of 2019 GDP. The total rose by N260bn in the quarter, and the stock of promissory notes, issued to clear FGN arrears to contractors, oil marketers and state governments, by N220bn to N960bn.
This figure could reach N2.5trn on the verification of claims. Additionally, there has been talk of securitizing the FGN's ways and means advances from the CBN. There was also a small increase of N40bn in the stock of FGN bonds in Q1.
The domestic debt stock has increased by N1.42trn over the past 12 months or by 10.8% because of the issue of new pro-notes and because the FGN has not issued Eurobonds since November 2018. It has pledged not to tap this market this fiscal year.
Total public debt at end-March reached N28.63trn according to the DMO's measure, equivalent to 19.9% of GDP. This covers all the obligations of the three tiers of government. If we add AMCON bonds, and the debt of the NNPC and other public agencies, we should still be a little below 30% of GDP. In line with established practice, the data do not cover the CBN's issuance of NTBs within its open market operations. Also, most data series for public debt (including the DMO's) do not cover the obligations of central banks.
This debt stock/GDP ratio compares very well with peer EMs. Public debt in Kenya, for example, represented 61.1% of GDP in June 2019.
FGN domestic debt (N trn)
Sources: Debt Management Office (DMO); FBNQuest Capital Research
The weakness of the story is the burden of debt service. The 2020 budget, approved by the National Assembly, has total debt service at 48.1% of total FGN revenue. The reality could prove rather worse.