Economy

Nigeria’s Borrowing Spree, Any Cause for Worry?

Published

9 years ago

04/07/2017

By Afrinvest

A new report by Afrinvest has taken a look into the recent borrowings by the Federal Government through the sale of bonds.

Afrinvest, in its weekly update, noted that much has been said on Nigeria’s aggressive borrowing spree from domestic and international capital markets since 2016, and deservedly so.

Since the start of a prolonged global oil price drop in H2:2014, the Nigerian economy has recorded a significant downturn in performance as plummeting government revenues and the resultant FX crisis dragged the economy into its first recession in 25 years.

As a result, an expansionary budget of N6.1tn was adopted in the 2016 fiscal year to boost growth and fund more capital projects, with a deficit of N1.8tn estimated for the period. No thanks to the resumption of oil militancy in February 2016 and substantial underperformance of non-oil revenue relative to projections, actual FGN retained revenue was 18.0% short of target, thus deficit widened further. In order to plug this deficit, the Federal Government embarked on an aggressive borrowing spree and this has been sustained into 2017.

To this end, the Debt Management Office (DMO) decided to alter the public debt mix by leveraging on relatively underexplored foreign currency borrowing capacity.

Multilateral loans were sought from the AFDB (US$646.6m) in addition to bi-lateral loans from the China EXIM Bank, France AFD and Japan JICA.

Following improvements in domestic investment landscape at the turn of the year, Nigeria returned to the International capital market after a 3-year hiatus, successfully raising US$1.5bn via Eurobonds and US$300.0m in diaspora bond.

On the domestic front, the DMO has continued with its monthly bond auctions and took it a step further by introducing atypical bonds such as the Savings Bond and a N100.0bn Sukuk offering closing today.

The 2017 budget is projecting another record expenditure year, with fiscal deficit estimated at N2.4tn – domestic borrowing accounting for 53.0% (N1.3tn) of the total while foreign borrowing was projected at N1.1tn.

Whilst the deficit funded expansionary fiscal policy pursued in 2016 had a positive impact of growth – as seen in GDP by expenditure numbers in 9M:2016 – it has come at a cost as public debt profile has remained on the uptrend over the years.

According to the DMO, FGN total debt stood at N10.9tn as of year-end 2015 but has risen an astonishing 48.1% in 15 months to N16.2tn in Q1:2017.

The rising debt profile is not surprising given the widening budget deficit and large depreciation of the Naira; however, the cost of servicing the mounting obligations took up more than 60.0% of revenue in H1:2016 and has become a major source of concern on debt sustainability.

The major argument for increased deficit spending is that the economy is underleveraged with a debt to GDP ratio of 20.0%, but also hard to ignore is the offsetting low non-oil revenue to GDP ratio. Nigeria’s Tax/GDP ratio is 6.0%, which is relatively low when compared to SSA peers – South Africa (26.2%) and Kenya (15.4%).

The nation’s tax collection and administration system is still deemed inefficient with multiple tax system and a high tax evasion & avoidance rate.

Despite the recent drive to increase tax revenue, not much has changed in terms of actual results. In fact, federally collected Non-oil revenue fell 4.4% in FY:2016 to N3.0tn. To their credit, fiscal authorities have doubled down on tax reforms including the recently launched Voluntary Asset and Income Declaration Scheme (VAIDS) which grants taxpayers a time-limited opportunity to regularise their tax status without penalty.

However, with the economy challenged, the odds of significantly boosting Tax revenue in the near term is slim and we expect budget deficits to remain high for the next 2-3 years. What does this imply for medium term debt sustainability? Our opinion on this is a bit nuanced. The structure of Nigeria’s public debt is heavily tilted towards the domestic market (up to 77.9% of aggregate debt) and this easier to deal with in the event of a credit crisis.

Foreign debt obligations are also mostly multilateral and bilateral in nature (78.0% of total foreign debts) which are typically long tenured and granted at concessionary rate.

Thus, we do not expect a debt crisis in the near term but policymakers will need to further diversify revenue base or start deleveraging to avert one in the medium term.

Source: Afrinvest

Economy

CSCS, Afriland Properties, MRS Oil Weaken NASD Exchange by 1.12%

Published

1 hour ago

09/04/2026

Adedapo Adesanya

By Adedapo Adesanya

Three stocks further weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.12 per cent on Wednesday, April 8, with the Unlisted Security Index (NSI) down by 44.43 points to 3,930.91 points from the previous day’s 3,975.34 points, and the market capitalisation went down by N26.59 to N2.351 trillion from N2.378 trillion.

MRS Oil lost N11.00 during the session to close at N161.00 per share compared with Tuesday’s closing price of N172.00 per share, Central Securities Clearing System (CSCS) Plc dipped by N3.74 to N67.95 per unit from N71.69 per unit, and Afriland Properties Plc fell by N1.10 to sell at N15.95 per share versus N17.05 per share.

There were two gainers at the midweek trading session, led by IPWA Plc, which appreciated by 55 Kobo to N6.61 per unit from N6.06 per unit, and First Trust Mortgage Bank Plc improved its value by 4 Kobo to N2.32 per share from N2.28 per share.

Yesterday, the volume of securities rose by 620.4 per cent to 5.7 million units from 797,264 units, the value of securities increased by 25.1 per cent to N32.7 million from N26.1 million, and the number of deals climbed by 12.1 per cent to 37 deals from the preceding session’s 33 deals.

Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, trailed by CSCS Plc with 57.2 million units exchanged for N3.9 billion, and Okitipupa Plc with 27.5 million units traded for N1.8 billion.

GNI Plc also finished the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by Resourcery Plc with 1.1 billion units worth N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units transacted for N1.2 billion.

Economy

Naira Grows 1.07% to N1,371/$1 at Official Market as FX Pressure Eases

Published

2 hours ago

09/04/2026

Adedapo Adesanya

By Adedapo Adesanya

Foreign Exchange (FX) demand pressure eased on the Naira on Wednesday, April 8, in the Nigerian Autonomous Foreign Exchange Market (NAFEX) after gaining N14.84 or 1.07 per cent against the greenback to quote at N1,371.82/$1 compared with the previous day’s N1,386.66/$1.

Also, the local currency appreciated against the Euro in the same market window at midweek by N1.54 to close at N1,604.07/€1 versus Tuesday’s closing rate of N1,605.61/€1, but lost N6.26 against the Pound Sterling to trade at N1,844.83/£1 versus N1,838.57/£1.

In the parallel market, the exchange rate of the Naira to the US Dollar remained unchanged yesterday at N1,410/$1, according to data sourced by Business Post.

There were indicators that the official FX market experienced a liquidity surge, which eased worries around the dominant US Dollar on Wednesday, as the Central Bank of Nigeria (CBN) revealed interbank deals rose to 220 from 71 reported the previous day.

The domestic currency has been in strong demand from foreign portfolio investors seeking to purchase OMO bills and other fixed-income instruments.

Forecasts also show that the local currency will remain relatively stable during the second quarter of the year, trading within the N1,340 to N1,430 per Dollar band on improved FX liquidity, stronger oil earnings, and rising external reserves, which have climbed above 50 billion dollars.

As for the cryptocurrency market, it fell after an initial ceasefire-fueled rally, with markets retracing Wednesday’s “ceasefire euphoria” as cracks emerge in the US-Iran truce while the Strait of Hormuz remains effectively closed.

Global risk assets face renewed pressure as geopolitical uncertainty combines with what analysts call “uncoordinated tightening” by major central banks, reinforcing higher-for-longer interest-rate expectations.

The price of Cardano (ADA) fell by 4.7 per cent to $0.2500, Ripple (XRP) slumped 3.7 per cent to $1.33, Dogecoin (DOGE) shrank by 3.5 per cent to $0.0915, Binance Coin (BNB) slipped 2.6 per cent to $600.02, Ethereum (ETH) went down by 2.5 per cent to $2,183.82, Solana (SOL) dipped 2.5 per cent to $82.24, and Bitcoin (BTC) depreciated by 1.1 per cent to $70,995.20.

However, TRON (TRX) appreciated by 0.4 per cent to $0.3173, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.

Economy

Customs Street Surges 0.28% Despite Persistent Weak Sentiment

Published

2 hours ago

09/04/2026

Dipo Olowookere

By Dipo Olowookere

The Nigerian Exchange (NGX) Limited rallied by 0.28 per cent on Wednesday despite weak investor sentiment, as the bourse ended with 18 price gainers and 38 price losers, implying a negative market breadth index.

The growth recorded yesterday by Customs Street was influenced by the 2.11 per cent rise posted by the energy index, and the 1.79 per cent jump achieved by the banking sector.

The other sectors experienced profit-taking, with the consumer goods losing 1.07 per cent, the insurance counter down by 0.36 per cent, and the industrial goods space down by 0.19 per cent.

Universal Insurance chalked up 10.00 per cent to sell for N1.21, Omatek improved by 9.78 per cent to N2.47, VFD Group expanded by 9.71 per cent to N11.30, CWG appreciated by 9.64 per cent to N21.05, and Livestock Feeds gained 9.56 per cent to close at N7.45.

On the flip side, UPDC REIT lost 10.00 per cent to settle at N6.75, Fortis Global Insurance shed 9.92 per cent to quote at N1.18, Deap Capital depreciated by 9.85 per cent to N5.40, Chams went down by 9.47 per cent to N3.06, and Japaul declined by 8.82 per cent to N3.10.

Yesterday, the All-Share Index (ASI) went up by 562.43 points to 202,585.53 points from 202,023.10 points, and the market capitalisation advanced by N389 billion to N130.404 trillion from N130.015 trillion.

During the session, 1.0 billion stocks worth N40.6 billion exchanged hands in 52,723 deals compared with the 1.1 billion stocks valued at N40.3 billion executed in 78,006 deals a day earlier, indicating an uptick in the trading value by 0.74 per cent, and a shortfall in the trading volume and number of deals by 9.09 per cent and 32.41 per cent apiece.

The activity chart was led by Access Holdings, which sold 233.0 million units valued at N6.1 billion, Fidelity Bank exchanged 113.1 million units worth N2.2 billion, Wema Bank recorded a turnover of 103.3 million units valued at N2.7 billion, Zenith Bank transacted 60.6 million units for N6.5 billion, and Chams traded 47.5 million units worth N154.6 million.