Nigeria’s Plan to Lengthen Debt Maturity Amount to Default – Moody’s

Nigeria’s Plan to Lengthen Debt Maturity Amount to Default – Moody’s

Nigeria’s plan to lengthen debt maturity may amount to a default under Moody’s definition, the global ratings agency said in a new release.

Finance Minister, Ahmed Zainab, told Bloomberg recently that Africa’s most populous country with a $450 billion gross domestic product size plans to restructure its external debts.

However, Debt Management Office has said the country has no plan to restructure its debt.

In the first half of 2022, Nigeria’s external debts printed at $40.064 billion. A breakdown of the sum indicates that about 48% of the sum is owed to multi-lateral lenders.

Meanwhile, 11.73% of the external debts came from bilateral borrowing arrangements. About 39% of the total external debt are commercial loans from the Eurobonds market.

Zainab also said Nigeria will explore another Eurobond raise in 2023 if the market condition improves – amidst sporadic interest rate hikes by global central bankers.

China recently announce that Beijing has paused on advancing loans and credit to African countries under its belt and road initiative – A global infrastructure development strategy adopted by the Chinese government in 2013 to invest in nearly 150 countries and international organizations.

The latest report shows that more than 40 African countries and other nations from emerging markets owe China more than 10% of their respective gross domestic product sizes.

Nigeria’s announced exploration of options to extend the maturity of its debts, and lessen its exposure to higher interest rates through buybacks and debt exchanges could constitute a default, Moody’s said today.

Last month, the global rating firm had noted that higher oil prices support the government finances and current account but cost of oil subsidies and financial outflows are key constraints.

In a review, it noted that the subsidies have accelerated the recent deterioration in the public finances. Moody’s said decision to keep subsidies illustrates weak institutions and limited capacity to implement challenging reforms.

Moody’s credit view reflects Nigeria’s moderate public sector debt, offset by its very weak institutional capacity and extremely low revenue base. READ:Nigeria’s Public Finance Starts Falling Since 2016 –Moody’s

Nigeria’s total public debt stock, representing the domestic and external debt of the Federal Government of Nigeria (FGN), the thirty-six (36) State Governments and the Federal Capital Territory (FCT), was N42.84 trillion in the first half of 2022.

Total external debt was valued at $40.06 billion or N16.61 trillion as of June 30, 2022, which was about the same level as March 31 when it printed at $39.96 billion or N16.61 trillion.

DMO said over fifty-eight percent (58%) of the external debt are concessional and semi-concessional loans from multilateral lenders such as the World Bank, International Monetary Fund, Afrexim and African Development Bank and bilateral lenders including Germany, China, Japan, India and France.

In the first half of 2022, total domestic debt was N26.23 trillion or $63.24 billion due to new borrowings by the FGN to part-finance the deficit in the 2022 Appropriation Act, as well as new borrowings by state governments and the FCT.

Thus, the debt to gross domestic product ratio printed at 23.06% in the first half of 2022 compared to the ratio of 23.27% as at March 30, 2022, and remains within Nigeria’s self-imposed limit of 40%.

DMO said while the FGN continues to implement revenue-generating initiatives in the non-oil sector and block leakages in the oil sector, the debt service-to-revenue ratio remains high.

# Nigeria’s Plan to Lengthen Debt Maturity Amount to Default – Moody’s#