Nigeria's Debt Profile on a Rise - PFI Capital Limited

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Monday, July 06, 2020 / 04:40PM / PFI Capital Limited/Header Image Credit: Ghana Business News



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The DMO recently released Nigeria's public debt profile as at Q1'20 and it shows total public debt increased by 4.49% to N28.63 trillion from N27.40 trillion recorded in Q4'19. In monetary terms, it translates to N1.23 trillion increase in three months. We however note the discrepancy in the exchange rate used for conversion. While N326/$ (CBN official exchange rate as at December 31st, 2019) was used in converting the domestic debts to USD in Q4'19, N361/$ (CBN official exchange rate as at March 31st, 2020) was used in converting the external debts to Naira in Q1'20.

 

Fig. 1: Total Public Debt Stock Outstanding as at Q1'20 (N'bln)

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Source: DMO, PFI Capital Research

 

Total domestic debt stood at N18.64 trillion while total external debt stood at N9.99 trillion as at Q1'20. When compared with the debt profile in Q4'19, it shows the domestic debt increased marginally by 1.41% while the total external debt grew by 10.75% during the period. The growth in external debt stemmed majorly from increase in bilateral debt as there was no auction for both the eurbonds and diaspora bonds during the period.

 

FGN Bonds remain the largest proportion of the FGN total domestic debt stock outstanding. As at Q1'20, total amount outstanding of the FGN bonds was N10.56 trillion, representing 72.65% of the total domestic debt stock. With the Nigerian Treasury Bills (NTB) amounting to N2.65 trillion as at Q1'20, it represents 18.24% of the total domestic debt stock outstanding. Promissory notes which was N957.20 billion as at Q1'20 represents 6.59% of the total debt stock outstanding while other instruments take the remaining 2.53% of the total debt stock outstanding. 

 

 

Fig. 2: Components of Domestic Debt Stock Outstanding as at Q'20 (N'bln)

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Source: DMO, PFI Capital Research

 

In the external debt segment, Nigeria's external debt stock to the World Bank amounts to $10.09 billion as at Q1'20 while the country's external debt stock to the AfDB Group as at Q1'20 stood at $2.56 billion. These two sources combined represents 45.75% of Nigeria's total external debt stock outstanding. In the bilateral front, Nigeria external debt stock outstanding stood at $3.84 billion representing 13.89% of the total external debt stock. Of the bilateral debt, Nigeria's debt stock to the Exim Bank of China amounts to $3.12 billion which is 81.25% of the country's total bilateral debt and 11.28% of the total external debt stock.

 


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Fig. 3: External Debt Stock Outstanding as at Q1'20 ($'Mln)

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Source: DMO, PFI Capital Research

 

Commercial loans represent 40.37% of the total external debt stock outstanding as at Q1'20. Nigeria's outstanding debt under the Eurobond category amounts to $10.87 billion while diaspora bond amounts to $300 million. We note the diaspora bond was raised in 2017 and was oversubscribed by 130%.

 

On debt service payments, we note that the FGN has paid N609.13 billion to service domestic debt obligations in Q1'20 while the external debt service payments amount to $472.57 million during the period. For the domestic debt service payment, the FGN paid N488.94 billion on interest on FGN Bonds while interest payments on the NTBs amounted to N111.61 billion during the period and N8.20 billion paid as rentals for the FGN sukuk bonds in the first three months of the year. Interest payment on the FGN savings bond amounts to N392.79 million during the period. We further note that 56% of the total external debt service payment during the period was from the interest payments on the FGN Eurobonds, with the 7.874% Eurobond 2032 enjoying more interest payments at $59.06 million. Multilateral and Bilateral debt service payments constitute 24% and 20% of the total external debt service payments respectively.

 

We note that IMF is not included in the external creditors in Q1'20 as the country's first loan from the IMF came in April 2020. This constitutes $3.4 billion under the Rapid Financial Instrument (RFI) to support the efforts of the FGN in addressing the severe economic impact of the COVID-19 shock as well as the sharp fall in oil prices. Hence, we expect the $3.4 billion to reflect in the debt outstanding figures of the country in Q2'20. The $750 million power sector loan from the World Bank is also expected to reflect in the Q2'20 external debt stock outstanding, as well as the N150 billion FGN sukuk bond raised in June (not forgetting the monthly bond auctions).

 

*The domestic debt stock outstanding and domestic debt service payment data are provisional subject to reconciliation.




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