Public debt indicators still very healthy


Tuesday, 18 November 2014 9.30PM (AUTHORED 141114) / FBN Capital Research


The quarterly data release from the DMO shows FGN domestic debt at end-September at N7.65trn (US$45.8bn), equivalent to 9.6% of 2013 GDP.


The increase in naira terms in the third quarter was N230bn, whereas the new issuance (gross) of FGN bonds by the DMO in the period raised N300bn.


The debt burden rises to 11.5% when we include the FGN’s external debt. These stellar indebtedness ratios owe much of course to the rebased national accounts published by the National Bureau of Statistics (NBS).


These are the sovereign obligations of the FGN, and so exclude the debt of AMCON (now solely held by the CBN), the NNPC and other public agencies, and the state governments. We estimate the latter at N2.50trn (bonds and loans combined) and the burden for the widest measure of public debt at 25% of revised 2013 GDP. 


This is the implausible nightmare scenario and assumes, for example, that AMCON achieves no more recoveries.   


The FGN’s external debt includes the issuance by state governments which it necessarily guarantees, and is mostly loans from the donor community on concessional terms.

The DMO’s optimum ratio for sovereign debt as a proportion of GDP stands at 25% but is likely to be adjusted sharply downwards due to the rebasing of the national accounts. Its orthodoxy and that of the federal finance ministry suggest that we should not expect a borrowing spree to make a dramatic impression on, for example, the huge infrastructural deficit.    


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