Nigeria’s total public debt stock of N12.603 trillion or $65.428 billion as at end of December, 2015 has been described as too low in the face of a recession, a plunging currency, high inflation and a widening budget deficit, latest Bloomberg report has indicated.
This is even as a Central Bank of Nigeria (CBN) monthly compilation of funds used for sugar imports as quoted by Bloomberg has shown that Nigeria imported $227 million of sugar in the first seven months of this year. The highest monthly value of imports of $79.1 million was recorded in June, for raw sugar as well as “chemically pure glucose and glucose syrup not are containing fructose,” according to the document.
The recently released Debt Management Office’s 2015 annual report and statement of accounts showed that as at end of December, 2015, the total public debt stock of the country was N12,603,705,280,000 ($65,428.53 million) compared to N11,243,120,220,000 ($67,726.28 million) in 2014, representing an increase of 12 per cent (N1,360,585.06 million) in 2015.
It showed that external debt accounted for N2,111,530,710,000 ($10,718.43 million) or 16.75 percent, while domestic debt accounted for N10,492,174,570,000 ($54,710.10 million) or 83.25 per cent.
Nigerian Tribune checks reveal that at the current interbank exchange rate of a conservative N310 to the dollar, Nigeria’s total public debt stock of $65,428,530,000 amounted to N20.283 trillion, assuming that no other debt has been incurred in the last seven months of 2016. Nigeria said on August 8, 2016 that it is seeking banks to manage a Eurobond sale of as much as $1 billion, its first foray into the market since 2013.
David Malingha Doya of Bloomberg News and other foreign analysts including Manji Cheto at Teneo Intelligence firm, said in a report released on Wednesday that the Nigeria has room to tap international markets as it plans to spend its way out of an economic slump.
“If you look at Nigeria’s debt profile, the additional external debt is not likely to have any material negative impact,” said Cheto, the London-based senior vice president at Teneo.
“One is clear, however, the yield is likely to be higher than Nigeria’s last Eurobond sale in 2013, given that the macroeconomic fundamentals have deteriorated significantly.”
Bloomberg quoted Stuart Culverhouse, Chief Economist at Exotix Partners LLP, as having said by phone from London on August 10 that: “The recent devaluation of the naira is a barrier lifted. We have seen economies slow elsewhere and that shouldn’t be a barrier to raising debt. Nigeria’s debt profile is one of the most favourable ones in Africa and investors appreciate that,” Culverhouse said. “They should take the opportunity while it’s available.”
Yields on the country’s $500 million of bonds due July 2023 fell 11 basis points to 6.65 per cent on Wednesday. The yield is down 203 basis points this year.
Nigeria’s dollar-denominated bonds have returned 1.9 per cent this quarter, compared with the 4.7 per cent average return of dollar debt in Sub-Saharan Africa, according to data compiled by Bloomberg.
President Muhammadu Buhari approved a record 6.1 trillion naira ($19.3 billion) spending plan this year after Nigeria’s economy contracted in the first quarter as revenue fell because of lower oil prices and a decline in output. The country’s ratio of debt to GDP, at 13.2 percent, is the lowest in sub-Saharan Africa and about a third of the average of 37.2 percent, according to the IMF.
Nigeria plans to borrow as much as $4.5 billion in the bond market through 2018, according to its Debt Management Office, as capital spending rises to about 1.75 trillion naira, more than four times the amount in 2015.
The money will be spent on roads, railways, ports and electricity generation to support diversification of the oil-dependent economy into agriculture and solid-minerals development.
According to the report, after shrinking 0.4 percent in the first quarter, the economy is set to contract 1.8 percent in 2016 as shortages of power and foreign currency curb output, according to the IMF. The Central Bank of Nigeria increased interest rates by three percentage points this year to 14 percent as inflation reached 16.5 percent in June.
The currency has slumped 38 percent against the dollar since the central bank allowed it to trade freely in the interbank market on June 20, removing a currency peg that had deterred foreign investment and squeezed importers.
Nigeria may have to pay between 7 and 7.5 percent for a new Eurobond issue, Culverhouse said.
“The market is well supported at the moment as sentiment remains constructive,” said Samir Gadio, head of Africa Strategy at Standard Chartered Bank Plc in London. Investors had expected Nigeria to borrow more than the $1 billion it plans to raise in the Eurobond market, he said.
The government has also approached the World Bank and export-credit agencies to borrow at concessionary terms in addition to commercial loans to help finance a budget gap of 2.2 trillion naira, Finance Minister, Kemi Adeosun said on August 9 in Abuja, the capital.