Don't Miss

Nigeria’s domestic debt now 9.2% of revised GDP

By BusinessNews Staff on August 14, 2014

The Federal Government of Nigeria’s (FGN) domestic debt at the end of June this year now stands at N7.42 trillion or $46.1 billion, equivalent to 9.2 per cent of the rebased 2013 gross domestic products (GDP), the quarterly data released by the Debt Management Office (DMO) has revealed.

Analysis of the numbers shows an increase of N240 billion in the second quarter out of which new issuance of FGN bonds by the DMO accounting for N200 billion.

A further analysis of the numbers shows that the debt burden rising to 11.0 per cent when the FGN’s external debt is included.

Reacting to the development, analysts at FBN Capital noted that the indebtedness ratios owe much of course to the rebased national accounts published by the National Bureau of Statistics (NBS) recently.

“These are the sovereign obligations excluding the debt of Assets Management Corporation of Nigeria (AMCON) held by the CBN, the Nigerian National Petroleum Corporation (NNPC) and other public agencies, as well as state governments. We estimate the latter at N2.50 trillion (bonds and loans combined) and the burden for the widest measure of public debt at 25 per cent of revised 2013 GDP, said FBN Capital.

The above calculations, according to the analysts, is very much the worst case scenario, assuming, for example, that AMCON achieves no more recoveries.

They added: “The FGN’s external debt includes the issuance by state governments, which it necessarily guarantees, and it is mostly loans from the donor community on concessional terms. We note that the FGN has a medium-term target of a 60/40 mix of domestic and external obligations in its debt profile. However, we estimate the blend at end-June at 84/16. An issue on the Eurobond market this year would have pushed the ratio towards the target but the FGN plans only a diaspora bond of up to $300 million.”

With a total bid of N70 billion every month for at least five years, amounting to N840 billion a year, the federal government of Nigeria has received a total of N4.2 trillion in five years.

The Nigerian bond market has witnessed massive expansion in the past few years following huge interest from pension fund administrators (PFAs) and a few offshore investors.

DMO helds its sixth monthly auction of FGN bonds of the year recently, and has an unchanged target of raising N70 billion ($430 million) from the sale of two staple reopened issues, the 13.05 per cent Aug ‘16s and the 14.20 per cent Mar ‘24s.

Data from DMO show that domestic issuance for the year is well advanced with the raising of N385 billion (gross) from the sale of FGN bonds in the first five months.

[This Day]

headline