Our third and final analysis of the DMO’s data release for end-2016 brings us to the more comforting story of the FGN’s external debt burden. Total obligations amounted to US$11.41bn, equivalent to 3.6% of GDP. Only the outstanding Eurobonds of US$1.5bn attract market interest rates. The obligations will increase in this half-year with the concluded Eurobond sales of US$1bn, which could reach US$1.5bn following the acting president’s request to the National Assembly, and perhaps with the planned diaspora bond to raise US$300m.
The burden rose by just US$150m in H2 2016. Increased borrowings of US$180m from the African Development Bank (AfDB) Group and US$140m from Exim Bank of China were partly balanced by a fall of US$170m in dues to the World Bank Group. The period saw the disbursement of US$600m by the AfDB for budget support. The FGN hopes that the World Bank will shortly make similar funding available, and that the Exim Bank releases additional funds for infrastructural development.
External debt service in calendar 2016 was US$320m. If we take the interest payments of US$180m and the mid-year stock of US$11.26bn, we arrive at an average interest rate of 1.6%.
The optimal blend of domestic/external debt obligations is 60/40 according to the DMO’s medium-term strategy. The ratio for the FGN at end-2016 was 76/24, having edged towards the objective due to the devaluation in June.
Sources: Debt Management Office (DMO); FBNQuest Research
The FGN’s debt at end-2016, domestic and external combined, represented 14.9% of GDP, which compares very favourably with its sovereign peers with B+/B credit ratings.