Q3 2020 Debt Stock: World Bank Almost The Largest External Creditor


Friday, January 08, 2021  / 10:13 AM / By FBNQuest Research / Header Image Credit: Shutterstock

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The FGN's external debt stock increased by USD510m in Q3 '20 to USD32.0bn, equivalent to 8.0% of 2019 GDP. The DMO data also show that additional net borrowing from the World Bank Group accounted for USD280m of the increase. There were rises of USD100m in the FGN's outstandings to both France's Agence francaise de developpement and the IMF under its rapid financing instrument, the latter the result of exchange-rate movements (because the Fund's credits are granted in its own SDRs). The total includes the external borrowings of the state governments because they are guaranteed by the FGN: they amounted to USD4.3bn in Q2 '20.


In the absence of any new commercial borrowing, the share of the stock due to multilateral and bilateral creditors, and contracted on concessionary terms, rose from 64.5% to 65.1% of the total. Along with the very low debt stock/GDP ratio, this is a strong selling point for any roadshow.


Although the FGN has developed a decent Eurobond curve over recent years, it is remarkable that the World Bank Group is almost as large an external creditor as international capital markets (ICM).


Nigeria is still the largest economy in Africa but had the fifth largest stock of public external debt on the continent at end-2019 according to S&P. Egypt, Angola, Kenya and Ethiopia were all more indebted.


Nigeria is eligible for bilateral debt relief under the G20 initiative. However, it appears not to have sought the relief, which means that it is not expected to seek "comparable treatment" from private creditors such as bondholders.


There is still a hearty investor appetite for Eurobond issues by EM sovereigns with a decent credit story to share. Issuance costs have eased now that the virtual roadshow has been born, and because yields have compressed since the initial turbulence in March/April.


Benin Republic is expected to tap the market in these advantageous conditions with an 11-year, EUR denominated issue. Its rating (a B+/B split) is marginally better than Nigeria's although its debt stock/GDP ratio is not as good.  We would term Benin exotic because this would be just its second issue (accompanied perhaps by a tender offer). Investors have to be familiar with the workings of the Franc Zone. We are also aware of market chatter that Gabon, another zone member, is rethinking its Eurobond strategy.


We provide this market colour in passing because the FGN has a USD500m Eurobond maturity at the end of this month.


FGN external debt by lender group, Sep '2020 (% shares)             TOTAL: USD31.99bn

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

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