Citing Nigeria’s recent Eurobond launch, analysts at FBNQuest Research have said they expect the Debt Management Office (DMO)’s report for Q3’21 to show a sharp rise in the country’s public debt to Gross Domestic Product (GDP) ratio.
In a report obtained by New Telegraph at the weekend, the analysts stated that even if the Eurobond issuance is added to bonds issued by the Asset Management Corporation of Nigeria (AMCON) and the debts of public agencies such as the Nigerian National Petroleum Corporation (NNPC), the country’s public debt to GDP ratio would increase to no more than 30 per cent of GDP.
The analysts, who issued the report a few hours before the DMO announced that Nigeria’s latest Eurobond issuance was very successful as the country raised the sum of $4 billion and investors demanded more than four times the amount on offer, noted that in the pre-bond launch presentation that the Federal Government made, it put the nation’s public debt to GDP ratio at 21.6 per cent as of 2020, a peres centage, they said: “Compares very favourably with African peers, for which the data in the presentation is drawn from the IMF’s World Economic Outlook and may not be strictly comparable: 127.1 per cent for Angola, 78.0 per cent for Ghana and 68.7 per cent for Kenya.”
They further pointed out that while Nigeria’s ratio will rise sharply in the DMO’s report for Q3’21 to reflect the Eurobond issuance, “the ceiling for public debt has been raised by the DMO from 25 per cent to 40 per cent of GDP,” adding that “this leaves ample headroom for the proposed securitisation of the FGN’s ways and means advanc e peres from the CBN, estimated last year at N10 trillion but rising, and other new borrowings.”
In addition, the analysts said: “The DMO’s revised strategy for 2020-2023 also brings a new ceiling for sovereign guarantees of five per cent of GDP.
This is an area the FGN wants to develop for infrastructure financing.” Contending that Nigeria’s public debt is still, “manageable,” the analysts concluded that “if we broaden the measure of public debt to cover the bonds issued by AMCON (all held by the CBN) and the obligations of public agencies such as the NNPC, the burden would increase to no more than 30 per cent of GDP.
“The weak points of the Nigerian debt story are the debt service/FGN revenue ratio and the developmental impact of borrowed funds.”
New Telegraph reports that in the press statement it issued in February following the Federal Executive Council’s (FEC) approval of a new Medium-Term Debt Management Strategy (MTDS), that will guide the government in its borrowing activities for the period 2020-2023, the DMO noted that part of the targets in the new MTDS document include raising total debt to GDP from the current 25 per cent to 40 per cent.