Nigeria’s total public debt hits N26.215trn in 2019

.FG, 36 States debt grew by 16.88% in one year

…as FG sets to issue third Sovereign Sukuk

Editor

The Federal Government of Nigeria, including the 36 States and the Federal Capital Territory (FCT) as of September 2019, recorded a total public debt of N26.215 trillion, as against N25.701 trillion recorded during the corresponding period of 2018.

This development implies that during the period under review, the nation’s total public debt had grown by 16.88 per cent, latest data presented by the Debt Management Office (DMO) at an interactive session revealed.

The debt office, who presented a review of activities and its plans for raising capital from domestic and external sources in the year 2020, stated at the Interactive Sessions which held in Lagos and Abuja that the level of New Borrowings in the Appropriation Acts declined consistently since Nigeria exited the recession in the year 2017.

It also reiterated the fact that the increase in the New Borrowings in the Appropriations Acts between 2015 and 2017 was due to the need to stimulate growth and create jobs in the economy as contained in the Economic Recovery Growth Plan (ERGP).

The Sessions, however, had banks and institutional investors in the Federal Government of Nigeria (FGN) securities amongst, which were Pension Funds Administrators (PFA), Insurance Companies, Fund and Asset Managers.

Although, the nation’s debt office noted that the total public debt as of September 2019 included Promissory Notes in the amount of N812.650 billion, which had been issued to settle the FGN’s arrears to Oil Marketing Companies and State Governments under the Promissory Programme approved by the Federal Executive Council (FEC) and the National Assembly.

In addition, the stakeholders at the Interactive Sessions were informed that whereas the 2019 Appropriation Act provided for a total New Borrowing of N1, 605.63 billion split equally between Domestic and External, only the domestic component of N802.82 Billion was raised due to the late passage of the 2019 Appropriation Act and the expectation that the implementation of the 2020 Budget would commence on January 1, 2020.

Amongst, the highlights of the DMO’s achievements in 2019, was the success of issuance of a 30-year FGN Bond for the first time. The introduction of the 30-year Bond was to meet the investment needs of long-term investors such as insurance companies and support the development of the domestic financial markets in areas such as mortgages. From the FGN perspective, the 30-year Bond also contributed to reducing the refinancing risks of the Public Debt Stock. The product has enjoyed a strong demand as N284.391 billion had been issued by the end of September 2019.

According to the DMO, the Ratio of Domestic Debt to External Debt at 69:31 as at September 2019 was an improvement over the Ratio of 71:29 as at September 2018 compared to the target of 60:40 in the Medium-Term Debt Management Strategy. The Ratio of Long Term to Short Term Debt in the Domestic Debt as of September 2019 was 80:20, which shows that the target of 75:25 had been outperformed by September 2019.

Furthermore, it was an improvement over the Ratio of 73:23 recorded in September 2018.

Similarly, Total Debt as a percentage of GDP was18.47 5per cent as at September 2019 was well within the limit of 255 per cent and fares better in comparison with the Debt/GDP ratios of countries such as the United States of America, United Kingdom and Canada with ratios of 1055per cent, 855per cent and 905per cent respectively for the same period.

However, because they generate adequate revenues, their Debt Service/Revenue Ratios for the same period were much lower at 12.5per cent, 7.55per cent and 7.55 per cent respectively when compared to Nigeria’s 515per cent in 2017.

In the report disclosed that the low revenue base of Nigeria relative to its GDP is clearly reflected in the high Debt Service to Revenue Ratio.

According to the statement, this clearly brings to fore, the need for revenues to grow. The efforts towards increasing and diversifying revenue such as the passage of the Finance Act and Strategic Revenue Growth Initiative of the Federal Ministry of Finance, Budget and National Planning should thus be supported, it was added

The DMO also unveiled its plans for the year 2020, based on the New Borrowings in the 2020 Appropriation Acts, which comprises of N850 billion and N744.99 billion for External and Domestic Borrowings respectively.

The New Domestic Borrowings will be raised through FGN Bonds, Sukuk, FGN Savings Bonds and possibly Green Bonds. For External Borrowings the strategy is to first seek out concessionary and semi concessionary loans due to the lower interest rate and longer tenors. Any shortfall thereafter may be raised from commercial sources.”