The FGN’s external debt obligations at end-September amounted to US$21.59bn, equivalent to 5.8% of 2017 GDP. This includes the external borrowings of the state governments, which are mandatorily guaranteed by the FGN. The debt stock declined by US$490m q/q due to the redemption of a US$500m Eurobond, Nigeria’s first, in July. The DMO’s report for Q4 2018 will reflect the Eurobond sales in November to raise US$2.8bn. Debt due to international capital markets (ICM) will then regain top spot among creditor groups.
From a financing perspective, it is worth noting that 61.6% of the debt stock is due to multilateral and bilateral creditors on concessional terms.
In line with externalization, the N1.95trn deficit in the FGN’s 2018 budget is to be covered by external and domestic borrowings of N850bn (US$2.8bn) and N790bn respectively as well as unspecified privatization proceeds of N310bn. The external target has been met, and the domestic element close to half covered by FGN bond sales since June, when the budget was signed off by the president.
The head of state presented an N8.8trn budget for 2019 to the National Assembly in December, with a projected deficit of N1.86trn. Its passage is very likely to be lost in the run-up to the elections.
Sources: Debt Management Office (DMO); FBNQuest Capital Research
In any event, its underlying average oil price assumption of US$60/b now looks shaky in the light of the fall of crude below this threshold in recent weeks. We should also query its ambitious revenue projections, and point out that, while the DMO may well meet its funding targets, the deficit can overshoot and a substantial part of it be uncovered.