By FBNQuest Research
The FGN’s external debt obligations at end-June amounted to $22.08 billion, equivalent to 5.9 percent of 2017 GDP.
This includes the external borrowings of the state governments, which are necessarily guaranteed by the FGN.
The debt stock was flat on the previous quarter because, unlike in Q1 when it raised $2.5 billion, the FGN did not tap the Eurobond market.
A small decline in obligations to the World Bank Group was balanced by a rise in debt due to bilateral creditors, notably the Exim Bank of China and Germany’s KFW (state-owned development bank).
ICM are again the largest creditor group, and are likely to remain so due to the FGN/DMO policy of externalization of debt. From a financing perspective, it is worth noting that 60.1 percent of the debt stock is due to multilateral and bilateral creditors on concessional terms.
In line with externalization, the N1.95 trillion deficit in the FGN’s 2018 budget is to be covered by external and domestic borrowings of N850 billion ($2.8 billion) and N790 billion respectively as well as unspecified privatization proceeds of N310 billion.
There has been a surge in warnings about the sustainability of Nigeria’s public debt stock, some of them influenced by regret that commercial borrowings come without policy conditionality.
At current levels, the FGN can comfortably service external debt of $22 billion from the earnings accruing from oil production of +/-2.0 mbpd.
There is a more useful conversation to be had about the pace at which the FGN’s borrowings are funding an overhaul of the infrastructure and transformation of the economy from a rent-seeking to a producing model.
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