Nigeria’s domestic debt stock growth slows to 1% on DMO’s externalisation policy - BUSINESSDAY

APRIL 19, 2019

By David Ibidapo


Year-on-year growth in Nigeria’s domestic debt stock slowed to one percent in 2018, its lowest rate in the last five years, totalling N12.77 trillion ($41.6 billion) in value, government data show.


This follows the government’s policy of reducing its borrowing from the high-cost domestic debt market in preference for low-interest Eurobond market.

Data obtained from Nigeria’s Debt Management Office (DMO) indicated that in Q4 2018, domestic debt stock increased marginally by 4 percent from N12.28 trillion in Q3 2018. This raised Nigeria’s current debt stock to about 10 percent of 2018 GDP.

The increase by N487 billion in the fourth quarter was dominated by N331.27 billion issue of promissory notes to settle arrears due to oil marketers and sub-nationals.

According to a report by FbnQuest, the investment arm of First Bank of Nigeria Plc., “subject to verification by the National Assembly, pro-notes and bonds totalling a further N2.4trn will be issued to clear late payments to contractors, non-oil exporters and other creditors.”

During the period, the rise in total debt stock also came from a 100 percent increase in the issuance of FGN Sukuk instrument which amounted to N200 billion against N100 billion in the previous quarter.

Current trend in the debt stock profile of Nigeria has revealed a slowdown in the demand for fund sourcing by the Federal government of Nigeria (FGN).

While domestic debt stock growth slowed year on year to one percent, external debt stock slowed to 34 percent from 66 percent in 2017.

It is evident from chart that the burden increased substantially in both 2016 and 2017. The growth has since slowed as a result of the FGN/DMO policy of externalisation (deploying Eurobond sale proceeds to pay down Treasury bills).

It is said that the debt stock/GDP ratio, while popular with the ratings agencies and financial media, is of limited relevance because debt obligations are serviced by the government and not the broader economy.

“A more challenging ratio would be the proportion of FGN revenues required to service the debt (currently around 60%),” FbnQuest stated.


David Ibidapo


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