Nigeria breaches debt service country-specific threshold by 0.10%

•Cannot borrow more than $22.08bn in 2017 •As naira weakens to N460/$ despite forex sales to BDCs

Just as President Muhammadu  Buhari seeks approval from the  National Assembly for a foreign loan of $29.960 billion to address infrastructure deficit in the country, fresh facts have emerged that  with debt service at about N1.4 trillion, Nigeria has already breached the Country-specific threshold (of debt service) by 0.10 per cent as at end of December, 2015.

Also, data from the Debt Management Office showed that the maximum amount Nigeria can borrow in 2017 from both local and foreign sources must not exceed $22.08 billion without it violating its debt threshold.

Nigeria had a borrowing space of 5.89 percent of its Gross Domestic Product (GDP) of $374.95 billion which will take its debt limit to a country-specific threshold of 19.39 percent of its total public debt-to-GDP ratio,  it said.

Total public debt-to-GDP ratio for 2016 is projected at 13.5 percent, DMO said in a debt sustainability report seen by Nigerian Tribune on Wednesday.

Specifically, the ratio of Public Debt-to-GDP was 13.02 percent as at end of December, 2015, which was still within the Country’s Specific limit of 19.39 percent in the medium-term (up to 2017).

However,” the liquidity ratio revealed gross weaknesses in the structure of the economy, as the ratio of Public Debt Service-to-Revenue of 28.10 percent as at end of December, 2015, breached the Country-specific threshold of 28 percent, highlighting a potential risk to the debt portfolio. This could be worsened by the developments in the international oil market, as further decline in global oil prices would exert undue pressures on the already fragile economy, including the debt position in the medium to long-term.

The debt office notes that this buttresses the urgent need for concerted efforts to be intensified to diversify the revenue base of the country away from oil.

The 2016 DSA exercise adopted the updated version of the joint World Bank/IMF Debt Sustainability Framework for Low-Income Countries (DSF-LICs) analytical tool, which was released in August, 2015

The revised DSF-LICs was used to assess the country’s debt sustainability based on the Baseline and Optimistic Scenarios over a 20-year projection period under various assumptions.

Earlier, the World Bank had warned that Nigeria should be worried about the percentage of its revenue that goes into servicing of debts rather than the size of the debts.

The World Bank Lead Economist for Nigeria, Khwima Nthara, said this in Washington, United States, while answering questions from journalists from several African countries through video conference to mark the release of a report on the continent’s economies entitled: ‘Africa Pulse’.

Nthara said Nigeria’s total debt profile was sustainable but added that the cost of servicing it, especially the domestic debt, was too high and out of sync with the country’s revenue profile.

Meanwhile, naira hit its weakest level on the black market in more than a week at N460 to the dollar on Wednesday, as a central bank move to channel dollars to retail currency outlets failed to ease liquidity shortages, traders said.

Also, unofficial currency dealers said the naira exchanged for N500 on Wednesday as against N495 to the Euro and N555 compared to N550 to the British Pounds Sterling it resumed earlier in the week at.  This is even as the local currency at the official window sold for N 373.1377 on Wednesday as against N373.7 to the British Pounds and N 333.7588 compared to  N332.7 to the Euro which it started the week at.

Aminu Gwadabe, President, Association of Bureau De Change Operators of Nigeria, ABCON, disclosed that the CBN brokered a meeting between Travelex and ABCON which led to the commencement of the sale of Forex in Abuja, Kano and by extension, Port Harcourt.

The ABCON President said that the BDCS in Abuja got $20,000 each from the sale of Forex by First Bank on Tuesday, adding that Abuja environs would also benefit from the sale.