In the just concluded week, total debt figure released by the Debt Management Office (DMO) showed that Nigeria’s total public debt stock for the second quarter of 2020 increased by 8.31% to N31.01 trillion as at June 2020 (from N28.63 trillion as at March 2020).
The increase in the country’s total debt stock was chiefly due to a rise in external debt stock by 13.78% to N11.36 trillion (or USD31.48 billion at N361.00/USD) as at June 2020 from N9.99 trillion (or USD27.67 billion at N361.00/USD) in March 2020 – Nigeria received additional USD3.36 billion worth of loan from International Monetary Fund (IMF) in Q2.
Despite the increase in external debt stock, external debt service payments fell to N103.62 billion (or USD287.04 million) as at June 2020 from N170.60 billion (or USD472.57 million) as at March 2020.
Similarly, domestic debt stock increased by 5.39% to N19.65 trillion in June 2020 (from N18.64 trillion as at March 2020) as Federal Government of Nigeria (FGN) increased its regular and sukkuk bond issuances by N681.75 billion and N162.56 billion respectively within the period under review.
Further breakdown of the domestic debt figure showed that FG’s domestic debt stock rose to N15.46 trillion as at June 2020 (from N14.53 trillion as at March 2020); also, states’ debt increased slightly to N4.19 trillion (from N4.11 trillion).
Domestic debt service payment plunged q-o-q by 48.65% to N312.81 billion in Q2 2020 from N609.13 billion in Q1 2020.
Elsewhere, the era of subsidy payment on Premium Motor Spirit (PMS) by FG has now become a thing of the past as FG finally deregulated the downstream oil sector by opting out of price fixing.
According to Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), pump price of petrol will henceforth be determined by the forces of demand and supply as well as the cost of crude oil at the international market.
The Federal Government, through the PPPRA, had earlier embarked on partial deregulation or a petrol pricing regime in March 2020, in which it released – in about three months – guiding price bands of petrol pump price.
Amid the partial deregulation, the pump price was increased thrice till it eventually reached N158 – N160 per litre.
Going forward, and moving from partial to full downstream oil sector deregulation, the oil marketers are now free to source for foreign currency to import PMS on their own and fix their prices.
On the foreign scene, WTI crude plunged further week-on-week by 9.84% to USD37.30 a barrel given a 7.85% fall in US crude oil input to refineries to 12.78 mb/d as at Sept. 4, 2020 (it tanked by 26.96 % from 17.49 mb/d printed in Sept 6, 2019).
Also, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose w-o-w by 0.41% to 500.43 million barrels (and rose by 20.28% from 416.07 million barrels as at Sept. 6, 2019).
Similarly, Brent dipped further by 9.08% to USD40.06 a barrel while Bonny Light fell by 6.52% to USD39.26 a barrel as at Thursday, September 10, 2020.
What bothers the mind the most about Nigeria’s rising debt stock is the disparity between the country’s poor infrastructural state and the jump in debt stock within the last five years.
Total national debt stock ballooned by 155.85% to N31.01 trillion in June 2020, down from N12.12 trillion in June 2015 – adding a whopping sum of N18.89 trillion.
With the high pace at which the country amasses debt without a corresponding healthy growth in revenue, especially foreign earnings, it may run into difficulty servicing its foreign debt amid its over-reliance on crude oil revenue.
Meanwhile, we anticpate an increase in petrol pump price in the short-term amid subsidy removal.
However, with the completion of Dangote Refinery and accent to Petroleum Industry Bill, which could increase investments and competition in oil & gas, we expect the price to moderate in the medium to long-term.