Nigeria’s External Debt Rises to $18.9bn, Domestic Debt to N15.9tn

• Inflation dips further to 14.33% in February

Ndubuisi Francis and Udora Orizu in Abuja

Nigeria’s external debt rose to $18.91 billion (N5.787 trillion) as at the end of December 2017, while domestic debt rose to N15.937 trillion, bringing the total debt stock of the country to N21.725 trillion ($70.92 billion), data released wednesday by the Debt Management Office (DMO), has shown.

At N21.725 trillion, the country’s total debt stock rose to a new high, from N17.36 trillion ($56.73 billion) at the end of 2016.

Effectively, total debt as a percentage of GDP also rose to 18.2 per cent, based on International Monetary Fund (IMF) estimates, which put Nigeria’s nominal GDP at $394.8 billion (N122.4 trillion) in 2017.

The DMO Director-General, Ms Patience Oniha, who provided the data on Nigeria’s debt at a press briefing in Abuja on the nation’s Debt Management Strategy (DMS), said a detailed analysis of the debt stock depicted that the federal government’s domestic debt at the end of 2017 stood at N12.589 trillion, while the states and the Federal Capital Territory (FCT) accounted for N3.348 trillion of domestic debt.

The latest debt data came just as the National Bureau of Statistics (NBS), in its inflation report for February, showed that the inflation rate fell by 0.8 per cent, from 15.13 per cent in January to 14.33 per cent last month.
A further analysis provided by Oniha showed that total external debt of both the federal and state governments was N5.787 trillion ($18.91 billion) in 2017.

“The figures released showed that domestic debt for the federal government was N12.589 trillion, while the domestic debt of states and FCT was N3.348 trillion.
“The external debt of the federal government, states and the FCT was N5.787 trillion ($18.91 billion). The total public debt as at December 31, 2017, was N21.725 trillion,” she said.

According to her, total public debt represented 18.20 per cent of Nigeria’s GDP in 2017.
This shows that Nigeria’s debt continues to be sustainable and is well within the threshold of 56 per cent for countries in Nigeria’s peer group, she stated.

The DMO DG disclosed that the recent borrowings were, largely “for financing capital expenditure and stimulating the economy.

“The funds injected through the borrowings strongly supported the implementation of the federal government’s budget which helped the country to exit the recession in 2017,” she said.

Oniha explained that the new Debt Management Strategy had culminated in restructuring the portfolio with attendant reduction of debt servicing costs, lowering interests rates in the domestic market and an improved availability of credit facilities to the private sector.

She said the $3 billion Eurobond issue used in refinancing maturing domestic debt has resulted in an annual savings of about N81.66 billion in debt servicing, as the Eurobond was secured at about 7 per cent interest, compared to about 15 or 16 per cent interest on domestic borrowings.

“DMO repaid N198 billion Nigerian Treasury Bills in December 2017 with the proceeds of Eurobond issuances, and it has continued further implementation of the strategy in 2018 with the issuance of the $2.5 billion Eurobonds in February 2018.

“The proceeds of the $2.5 billion Eurobond are being used to repay maturing domestic debt, starting with N130 billion NTBs repaid on March 1, 2018.”

The federal government also plans to repay N482 billion of treasury bills in the second quarter and will halve the amount it wants to raise between March and May to lower borrowing costs, according to its debt auction calendar seen by Reuters wednesday.

A total of N964 billion worth of bills fall due in the second quarter, of which the government plans to roll over N482 billion.

News of those plans sent yields down 0.4 per cent on the secondary market yesterday, traders said.
Part of the Debt Management Strategy is aimed at reducing the ratio of domestic debt in the portfolio, while the ratio of external debt is increased – with a target of 60 per cent domestic and 40 per cent external.

The composition of the debt stock as at the end of 2017 showed that external debt was 26.64 per cent of the portfolio, up from 20.04% in 2016, while domestic debt was 73.36 per cent, down from 79.96 per cent in 2016.
Oniha said the federal government had to borrow because of the decline in revenues but assured that the most important consideration was the fact that the proceeds were being prudently applied to bridge the infrastructure gap.
The rate of increase of debt service, she stated, would reduce going forward, given the federal government’s attention to raising revenue through the Voluntary Assets and Income Declaration Scheme (VAIDS), as well as targeted efforts to increase local production of some of the goods responsible for high foreign exchange demand.
According to her, “Rice is a good story and we can replicate the rice story in other sectors. As we reduce imports and increase exportation of goods, we will readily build our external reserves.”

Inflation Dips to 14.33%
Meanwhile, for the 13th consecutive month, the inflation rate continued its downward trajectory, falling from 15.13 per cent in January to 14.33 per cent in February, representing a 0.8 per cent drop.
According to the latest figures released by the NBS, the Consumer Price Index (CPI), which measures the rate of inflation, stood at 14.33 per cent in February.

However, the continuing slide in inflation rate has not led to a drop in the cost of living in the county.
The NBS explained that increases were recorded in the Classification of Individual Consumption by Purpose (COICOP) divisions that yield the headline index.

On a month-on-month basis, the headline index stood at 0.79 per cent in February but was down by 0.01 per cent from the rate in January.

The percentage change in the average composite CPI for the 12-month period ended February 2018 over the average of the CPI for the previous 12-month period was 15.93 per cent.
The figures were 0.29 per cent lower than the 16.22 per cent recorded in January, the NBS said.

The NBS said the Food Index (year-on-year) also declined by 1.33 per cent from 18.92 per cent in January to 17.59 per cent in February. But all major food sub-indices increased during the month under review.
Price movements recorded by all items less farm produce or the core sub-index increased to 11.7 per cent (year-on-year) in February, while core inflation stood at 15.13 per cent last month.

According to the NBS, the figure was down by 0.4 per cent from the rate recorded in January at 12.10 per cent.
The highest increases were seen in prices of fuel and lubricants for personal transport equipment, maintenance and repair of personal transport equipment and narcotics during the month.

Increases were also recorded in the price of vehicle spare parts, passenger transport by air, clearing, repair and hire of clothing, hospital services, domestic services and household services and glassware, tableware and household utensils.

The Statistician-General, Dr. Yemi Kale, in January, had stated that he expected inflation to fall faster this year compared with 2017 but warned that spending ahead of 2019 presidential elections could trigger spiralling prices.
Kale noted that the country was in a harvest period with output increasing, which would help lower food prices, but stressed that household consumption remained fragile after the 2016 recession.