Nigeria Adds ₦20 trillion to Public Debts in 5 Years
L-R: Patience Oniha -DG, DMO; Godwin Emefiele -CBN Governor, President Muhammadu Buhari, Zainab Ahmed, Finance Minister

Nigeria Adds ₦20 trillion to Public Debts in 5 Years

Under President Muhammadu Buhari leadership, Nigeria has added N20 trillion to its public debt bucket since June, 2015, data from Debt Management Office (DMO) shows.

Amidst weak infrastructure development, total public debt stock in Nigeria has increased by 161% from N12.36 trillion in June, 2015 to N32.22 trillion in September, 2020.

The ballooning debt stock, which has been projected to grow further has triggered concern among Nigerians as debt service cost account for some 24% of 2021 budget.

A slew of macroeconomic analysts consistently expressed concern over rising debt exposure, citing lack of commensurate level of infrastructure development to support productive activities.

Year on year, debt service costs eat deep into the nation’s annual budget as recurrent expenditure outperformed capital spending.

Meanwhile, government has been on spending spree as attempts to raise non-revenue oil contribution to the gross domestic products remain weak.

Recently, total debt figure released by the Debt Management Office (DMO) showed that Nigeria’s total public debt stock for the first nine months of 2020 increased by 17.60% to N32.22 trillion as at September 2020 from N27.40 trillion as at December 2019.

Analysts Cowry Asset Limited in a macroeconomic note said the increase in the country’s total debt stock was chiefly due to a rise in external debt stock by 35.07% to N12.19 trillion (or USD31.99 billion at N381.00/USD) as at September 2020 from N9.02 trillion (or USD27.68 billion at N326.00/USD) in December 2019.

Recalled that Nigeria received additional USD3.36 billion worth of loan from International Monetary Fund (IMF) in Q2 2020 which further increased to USD3.45 billion in Q3 2020.

Also, the depreciation of the Naira against the greenback adversely impacted the external debts – year to date.

Market data showed that Naira depreciated against the USD by 16.87% to close at N381/USD as at September 2020.

Analysts at Cowry Asset Limited review that external debt service payments rose year-to-date to N467.44 billion (or USD1.26 billion) as at September 2020 from N332.46 billion (or USD1.08 billion) printed in September 2019.

Further breakdown of the total external debt stock as at September 2020, showed that multilateral loan accounted for 52.34% (USD16.74 billion) of which loans from International Development Association (IDA) was USD10.33 billion.

Meanwhile that of the IMF was USD3.45 billion.

Part of the loan book came from bilateral arrangement, with total loan that accounted for 12.74% (USD4.08 billion).

Of this, loan from China (Exim Bank of China) was USD3.26 billion while loan from France was USD0.50 billion as at September 2020.

Cowry Asset said it is clear Nigeria leaned more on China for its bilateral loan which apparently comes with low interest rate and longer moratorium.

Also, Commercial loan accounted for 34.92% (USD11.17 billion) of which Eurobonds was USD10.87 billion while Diaspora bond was USD0.30 billion.

Similarly, analysts said domestic debt stock increased by 9.02% to N20.04 trillion in nine month 2020 (from N18.38 trillion as at December 2019) as Federal Government of Nigeria (FGN) increased its regular and Sukuk bond issuances by N1.13 trillion and N162.56 billion respectively within the period under review.

Further breakdown of the domestic debt figure showed that FG’s domestic debt stock rose to N15.85 trillion as at September 2020 (from N14.27 trillion as at December 2019); also, states’ debt increased slightly to N4.19 trillion (from N4.11 trillion).

Domestic debt service payment increased year-to-date by 8.47% to N1.53 trillion in 9M 2020 from N1.41 trillion recorded in nine months of 2019.

Elsewhere, development in the oil segment appears to be positive for Nigeria in the short term. Oil prices have maintained uptrend as scrambling for covid-19 vaccines continues.

Analysts noted that West Texas Intermediate (WTI) crude price rose strongly by 5.76% week on week to USD50.83 a barrel given the 0.63% rise in US crude oil input to refineries to 14.38 million barrel per day (mb/d) as at January 1, 2021.

However, it declined year on year by 14.56% from 16.89 mb/d as at January 3, 2020).

The U.S. commercial crude oil inventories -excluding those in the Strategic Petroleum Reserve – fell by 1.62% in the wee to 485.46 million barrels as at January 1, 2021.

Albeit, inventories rose by 12.62% year on year from 431.06 million barrels as at January 3, 2020.

“What bothers the mind the most about Nigeria’s rising debt stock is the disparity between the country’s poor infrastructural state and the jump in debt stock within the last five years.

“Total national debt stock ballooned by 160.68% to N32.22 trillion in September 2020, down from N12.36 trillion in June 2015 – adding a whopping sum of N19.86 trillion.

“With the high pace at which the country amasses debt without a corresponding healthy growth in revenue, especially foreign earnings, it may run into difficulty servicing its foreign debt amid its overreliance on crude oil revenue.

“Hence, we expect FG to create the right policies that would engender economic diversification and support export of products rather than commodities, particularly this time that Naira is fast depreciating against the US dollars”, Cowry Asset Limited explained.

Read Also: ‘Eurobond Unlikely despite Nigeria’s Record-high Fiscal Deficit’

Nigeria Adds ₦20 trillion to Public Debt in 5 Years