Although Nigeria’s debt-service to revenue ratio has frequently exceeded 90 per cent in recent quarters; the proportion of external debt service costs is still relatively low, because a large component of the external debt burden (60 per cent) is owed to concessional lenders such as the World Bank, according to FBNQuest Research.
The DMO’s latest quarterly publication on external debt service show that the FGN’s external debt service obligations amounted to $521 million in the third quarter of 2021. The sum consists of $246 million and $275 million on market and non-market debt respectively. The amount is broadly comparable to the $507 million external debt service cost for the comparable quarter of 2020. However, it is c.74 per cent higher on a quarter-on-quarter (q/q) basis because debt service payments tend to peak in the third (and first) quarters due to a concentration of FGN bond issuance in those quarters.
The FGN’s external debt service payments for a nine ended 2021 totaled $1.8 billion (including a $500 million maturity in January 2021), up from c.$1.3 billion for the year-earlier period.
“Based on annual interest and fee payments in the nine months to September 2021 and the stock of
debt as at end-September we calculate the average borrowing cost from the World Bank Group at 1.3 per cent, the African Development Bank Group at 1.4 per cent and Exim Bank of China at 3.5 per cent”, it said.
For the FGN’s commercial obligations, the average works out at around 6.9 per cent.
Repayments of principal in the third quarter totaled $172 million, including $77 million to the World Bank Group and $58 million to the Exim Bank Of China.
“We see from the DMO’s data for September 20’21 that Nigeria’s total stock of external debt accounted for 41 per cent of total public debt of slightly over N38 trillion, while external debt service accounted for just c.21 per cent of total debt service.
The external debt stock is set to widen further as the newly approved financial year 2022 budget provides for total expenditures of N17.1 trillion, and a deficit of N6.4 trillion, with c.N5.1 trillion coming from domestic and external borrowings.
