Analysts question the disparity between poor state of Nigeria’s infrastructural and spike in public debt stock

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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 first nine months of 2020 increased by17.60% to N32.22trillion as at September2020 (from N27.40trillion as at December2019).

The increase in the country’s total debt stock was chiefly due toa rise in external debt stock by35.07% to N12.19trillion (or USD31.99billion at N381.00/USD) as at September2020 from N9.02trillion (or USD27.68billion at N326.00/USD) in December 2019–Nigeria received additional USD3.36 billion worth of loan from International Monetary Fund (IMF) in Q22020 which further increasedto USD3.45 billion in Q3 2020.

Also, the depreciation of the Naira against the greenback adversely impacted the external debts –year to date, Naira depreciated against the USD by 16.87% to close at N381/USDas at September 2020.Hence, external debt service payments rose YTD to N467.44billion (or USD1.26billion) as at September2020 from N332.46billion (or USD1.08billion) printed YTD in September 2019.

Further breakdown of the total external debtstockas at September 2020, showed that Multilateral loan accounted for 52.34% (USD16.74 billion) of which loans from International Development Association (IDA) was USD10.33 billion while that of the IMF was USD3.45 billion.

Bilateral loan accounted for 12.74%(USD4.08 billion) of which loan from China (Exim Bank of China) was USD3.26 billionwhile loan from Francewas USD0.50 billion as at September 2020–it is clear Nigeria leanedmore on China for its Bilateral loan which apparently comes with low interest rate and longer moratorium.

Commercial loan accounted for 34.92% (USD11.17 billion) of which Eurobonds was USD10.87 billion while Diasporal bond was USD0.30 billion. Similarly, domesticdebt stock increased by 9.02% to N20.04trillion in9M2020 (from N18.38trillion as at December2019) as Federal Government of Nigeria (FGN) increased its regular and sukkuk bond issuances by N1.13trillion 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 N15.85trillion as at September2020 (from N14.27trillion as at December2019); also, states’ debt increased slightly to N4.19 trillion (from N4.11 trillion). Domesticdebt service payment increasedYTDby 8.47% to N1.53trillion in 9M 2020 from N1.41trillion recorded in9M2019.

Elsewhere, the West Texas Intermediate (WTI) crude pricerose stronglyby 5.76% w-o-w toUSD50.83 a barrelgiven the 0.63% w-o-w risein US crude oil input to refineries to 14.38mb/d as at January1, 2021(however, It declined y-o-y by 14.56% from 16.89mb/d as at January3, 2020).

The U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve)fell by 1.62% w-o-w to 485.46million barrels as at January1, 2021(albeit, inventories rose by 12.62% y-o-y from 431.06 million barrels as at January 3, 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 160.68% to N32.22trillion inSeptember2020, down from N12.36trillion in June 2015 –adding a whopping sum of N19.86trillion.

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.

Hence, we expect FG to create the right policies that wouldengender economic diversificationand support export of products rather than commondities, particularly this time that Naira is fast depreciating against the US dollars.

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