Expected surge in domestic debt stock

The FGN’s domestic debt stock amounted to N11.97trn (US$39.2bn) at end-March, equivalent to 11.7% of 2016 GDP. We should view the steep increase of 8% or N910bn in Q1 in the context of the DMO’s deliberate front-loading of issuance, which totalled N535bn over the three months. This was a repeat of the pattern over the two previous years. The domestic debt stock/GDP ratio is very healthy for a sovereign rated B+/B. It remains so when we allow for the unrecorded debts of N2.2trn of the FGN which the administration unearthed in mid-December.

To expand federal (sovereign) into public domestic debt, we have to add: the bank borrowings of state governments, which the DMO estimated at N2.82trn at end-September, their outstanding bonds, the bonds issued by AMCON, and the debts of the NNPC and other public agencies.

When we include the debts unearthed in December, we have a public domestic debt stock of around 25% of 2016 GDP. We stress that this is the worst-case scenario. Our figure excludes the many credit lines extended by the CBN. In line with established practice, it also excludes contingents such as government guarantees.

Expected surge in domestic debt stock Sources: Debt Management Office (DMO); FBNQuest Research

The authorities will be disappointed by the take-up of the FGN’s new savings bonds for the retail segment. The DMO raised just N2bn in Q1.

Once the 2017 budget has been signed off by the presidency, the FGN will be looking to secure the balance of the projected N1.08trn external financing for the year. To date, it has raised US$1.5bn from the sale of Eurobonds.

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