A breather for domestic debt service

The data for the FGN’s domestic debt service in Q4 2018 offer some encouragement: the total cost was N13bn lower than in the year-earlier period, while the burden across the four quarters has started to stabilize. Interest paid on NTBs has eased due to externalization while the cost overall has benefited from a fall in borrowing costs. The next report (for Q1 2019) should reflect this year’s, post-election fixed-income rally.


  • The chart shows that the payments on FGN bonds peak in the first and third quarters. A cursory look at the data shows that the six largest bond issues were launched in these two quarters.
  • The weakness has arisen because debt service, of which more than 80% is due on the FGN’s domestic obligations, has grown more rapidly than revenue generation. Reports released by the Office of the Accountant-General of the Federation (OAGF) and the Budget Office of the Federation reveal that total debt service accounted for 44.5% of the FGN’s total inflows (retained revenue and assorted extra categories) in 2016, and 61.6% in 2017. For the first nine months of last year, the ratio deteriorated a little further to 63.0%.
  • The 2018 budget, signed off last June and still current, projects a burden of just 28.1% for total debt service/FGN revenue. The gap with recent outturns can be easily traced: total inflows of N2.81trn in the nine months compared with the full-year projection of N7.17trn.


FGN domestic debt service payments (N bn)

Sources: Debt Management Office (DMO); FBNQuest Capital Research


  • The IMF’s latest Article IV consultation, distributed earlier this month, is not hopeful on the subject. It projects that the FGN’s interest payments will rise from 60% of FGN revenue in 2018 to 75% in 2024, and downplays the positive impact of externalization.

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