Freshly released data from Debt Management
Office (DMO) showed that Nigeria’s total public debt stock increased quarter on quarter (q-o-q) by 7.12% to N35.47 trillion as at June 2021 (from N33.11 trillion as at March 2021).
The q- o-q increase in the country’s total debt stock was basically from increases in both external and domestic credits.
Specifically, external debt rose q-o-q by 9.95% to N13.71 trillion (or USD33.47 billion at N409.66/USD) as at June 2021 from N12.47 trillion (or USD32.86 billion at N379.50/USD) in March 2021.
Within the quarter, Nigeria received additional USD538.35 million worth of multilateral loans, a large chunk of it from International Development Association.
More so, the depreciation of the Naira against the greenback increased external debt; q-o-q, Naira depreciated against the USD by 7.95% to close at N409.66/USD as at June 2021.
In the review quarter, Nigeria paid down part of its Multilateral (USD64.56 million) and Bilateral (USD28.14million) principal which amounted to USD92.70 million.
Hence, external debt service payments fell to N84.50 billion (or USD206.26 million) in Q2 2021 from N126.02 billion (or USD332.07 million) printed in Q1 2021.
Further breakdown of the total external debt stock in Q2 2021 showed that Multilateral loans accounted for 54.88% (USD18.37 billion) of which loans from International Development Association (IDA) was USD11.62 billion, loan from IMF was USD3.50 billion while others stood at USD3.25 billion.
Bilateral loan accounted for 12.70% (USD4.25 billion) of which loan from China (Exim Bank of China) was USD3.48 billion and loan from France was USD0.48 billion in Q2 2021.
Commercial loans accounted for 31.88% (USD10.67 billion) of which Eurobonds was USD10.37 billion while Diaspora bond was USD0.30 billion.
On the other hand, local debt stock increased by 5.41% to N21.75 trillion in Q2 2021 (from N20.64 trillion in Q1 2021).
Breakdown of the domestic debt figure showed that FG’s domestic debt stock rose to N17.63 trillion in Q2 2021 (from N16.51 trillion in Q1 2021).
Despite the significant rise in FG’s domestic loan, local debt service payment plunged by 47.33% to N322.75 billion in Q2 2021 from N612.71 billion recorded in Q1 2021.
It appears Nigeria still need to fix the huge gap between its income and expenditure, which drives increased borrowings year in, year out.
Meanwhile, President Muhammadu Buhari, yesterday – October 7, 2021 presented the N16.39 trillion 2022 proposed budget to the National Assembly, with the crude oil benchmark price and production at USD57/barrel and 1.88 million per barrel respectively.
Notably, revenue of N10.13 trillion is expected in 2022 – of which N6.97 trillion and N3.16 trillion would come from Non-oil and Oil revenue respectively – resulting to a deficit of N6.26 trillion.
The worrisome part is that the fresh N5.01 trillion proposed borrowings could be partly spent on recurrent expenditure.
On the expense side, N4.89 trillion was earmarked for capital project, N3.6 trillion for debt service, N6.82 trillion for recurrent non-debt, N768.27 billion for statutory transfers and N292 billion for sinking fund.
Cowry Research notes that much of the country’s rising debt was spent on recurrent expenditure and abandoned capital projects that could have eased business operations and catalysed profitability that would, in turn, yield higher income via taxation for the government; hence, the imbalance between the physical infrastructure and the huge debts so far.
Thus, we therefore expect FG to tie each tranche of loan to a particular capital project as exhibited with its Sukkuk loans which has been more effective in delivering infrastructure.
Meanwhile, we commend the positive vibe coming from the side of Executive as presenting the budget in good time would enable early implementation although the oil output projection appears unrealistic given current output levels.