Recently, the Debt Management Office (DMO) published Nigeria’s total debt stock for Q2-2020. According to the report, Nigeria’s total debt stock rose 20.6% y/y and 8.3% q/q to N31.0tn ($85.9bn) as at the end of June-2020.
Also, the country’s external to domestic debt-mix stood at 36.7% (N11.4tn) and 63.3% (N19.6tn), respectively.
Notably, the strong increase in the public debt stock was driven by the devaluation of the official exchange rate from N306.0/$ to N361.0/$ as well as external and domestic borrowing used to plug the large fiscal deficit in the revised budget. In terms of debt servicing, total payments in Q2-2020 rose 42.6% y/y to N416.4bn, driven by both domestic and external debt.
Unfortunately, this suggests that debt servicing burden or debt service expenditure to revenue ratio would continue to worsen, amid weaker revenue profile and sustained pressure on the local currency. Nevertheless, recent policy adjustments including an increase in electricity tariff and moves towards full deregulation in the downstream oil sector are likely to improve the oil revenue profile of the government.
Contrariwise, a persistent rise in general prices, an increasing number of unemployed and underemployed people as well as the worsening incidence of poverty, are likely to weaken tax revenue.
United Capital Plc Research