Nigeria’s Debt Stock Rises by 17.60% in 9 Months 2020 on USD3.45 billion IMF Loan

Nigeria’s Public Debt Stock Climbs to N32.2tn
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In the just concluded week, 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).

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 – 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, Naira depreciated against the USD by 16.87% to close at N381/USD as at September 2020.

Hence, external debt service payments rose YTD to N467.44 billion (or USD1.26 billion) as at September 2020 from N332.46 billion (or USD1.08 billion) printed YTD 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 while that of the IMF was USD3.45 billion.

Bilateral loan accounted for 12.74% (USD4.08 billion) of which loan from China (Exim Bank of China) was USD3.26 billion while the loan from France was USD0.50 billion as at September 2020 – it is clear Nigeria leaned more on China for its Bilateral loan which apparently comes with a low-interest rate and longer moratorium.

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

Similarly, domestic debt stock increased by 9.02% to N20.04 trillion in 9M 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.

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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 YTD by 8.47% to N1.53 trillion in 9M 2020 from N1.41 trillion recorded in 9M 2019.

Elsewhere, the West Texas Intermediate (WTI) crude price rose strongly by 5.76% w-o-w to USD50.83 a barrel gave the 0.63% w-o-w rise in US crude oil input to refineries to 14.38 mb/d as at January 1, 2021 (however, It declined y-o-y 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% w-o-w to 485.46 million barrels as at January 1, 2021 (albeit, inventories rose by 12.62% y-o-y 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 the export of products rather than commodities, particularly this time that Naira is fast depreciating against the US dollars.