The latest debt figures released by the Debt Management Office for Nigeria indicate that total debt stock increased by about five percent in first quarter of 2022 compared to the figure in the last quarter in 2021. The cheery news perhaps is that revenue is growing at a faster rate as the non-oil sector continues to drive revenue growth with total contribution rising 80 percent in first quarter. According to the DMO, the nation’s revenue grew by 39.21 percent to N5.51 trillion as at March 31, 2022, boosting the hope of Nigeria to reduce its increasing debt if revenue drive is sustained. BAMIDELE FAMOOFO writes.
The total public debt stock as at March 31, 2022, was N41.6trillion or $100.07billion according to the Debt Management Office. The amount represents the Domestic and External Debt Stocks of the Federal Government of Nigeria, the 36 state governments and the Federal Capital Territory. The comparative figures for December 31, 2021, were N39.56trillion or $95.78billion.
The total public debt stock includes new domestic borrowing by the Federal Government to part finance the deficit in the 2022 Appropriation Act, the $1.25billion Eurobond issued in March 2022 and disbursement by multilateral and bilateral lenders. There were also increases in the Debt Stock of the state governments and the FCT.
Whilst the total public debt to GDP at 23.27 percent was below Nigeria’s self-imposed limit of 40 percent, the momentum by the government to grow and diversify revenues remains a priority to ensure that public debt is sustainable. Initiatives in this regard are yielding results as actual revenue for January to November 2021 at N5.51trillion was 39.21 percent more than the N3.96trillion recorded in 2020. Similarly, the share of non-oil revenue grew to 80 percent compared to 61 percent in 2020.
Domestic debt
Domestic debt stands at about N20.14 trillion as at March 31, 2022. It accounts for 48.41 percent of gross national debt. Breakdown of domestic debt showed that FGN Bonds account for 70.7 percent of local debts at about N14.24 trillion. NTBs accounts for about 21.9 percent of the domestic debt portfolio at N4.41 trillion while Promissory Notes stood at N762.54 billion representing 3.79 percent of local debt in the review period. Others are FGN Sukkuk, N612.56 billion or 3.04 percent; Nigerian Treasury Bonds, 0.38 percent (about N75.99billion). Green Bonds and FGN Savings Bond registered N25.69 billion and N18.12 billion, accounting for 0.13 percent and 0.09 percent respectively of total local debt in first quarter of 2022.
External debt
The Debt Management Office puts the value of the external debt component of the nation in the first quarter 2022 at about $39.97 billion. Breakdown of the components of the foreign debt showed that Multilateral debt (debt owed to international financial institutions) like the International Monetary Fund, World Bank and the African Development Bank Group stood at about $18.96 billion, representing 47.43 percent of the total external debt.
As at the end of first quarter of 2022, Nigeria’s exposure to the IMF stood at about $3.40 billion while total debt to the World Bank was $12.72 billion. Borrowings from the African Development Bank Group stood at about $2.85 billion. African Development Bank accounts for the bulk of the credit at $1.55 billion followed by African Development Fund with $956.12 million. Others are the International Fund for Agricultural Development, $238.14 million; Islamic Development Bank, $45.27 million; European Development Fund, $43.59 million; Arab Bank for Economic Development in Africa, $5.70 million; and Africa Growing Together Fund, $4.72 million.
The commercial component of the external debt, which naturally attracts a very high interest rate, stood at about $15.92 billion which represents 39.83 percent. Bilateral, country-based debt stood at about $4.5 billion with China leading with $3.67 billion, accounting for about 82 percent of the component. The other countries which Nigeria is indebted to are France (Agence Francaise Development), $567.89 million; Germany (Kreditanstalt Fur Wiederaufbau), $164.04 billion; Japan (Japan International Cooperation Agency) $67.96 million; and India (Exim Bank of India) $28.33 million.
“The domestic debt portfolio of the 36 States of the Federation and the Federal Capital Territory increased to N4.84 trillion in the first quarter of 2022 with Lagos State, the nation’s commercial nerve, accounting for more than 16 percent of the Sub-nationals’ total debt stock”
Debt service
About N669 billion was spent to service domestic debt in the first quarter period of 2022. More money was deployed to debt servicing in March with N376.44 billion released. In January, N188.36 billion was deployed to service debt while N103.88 billion was spent in February. The bulk of cash spent on debt servicing came from sales of Federal Government Bonds and Sovereign Bonds. Other instruments through which FGN raised funds to service its domestic debt are the FGN Sukuk rentals and Nigerian Treasury Bills. About N630.54 billion was raked from the sales of FGN Bonds in the first quarter followed by FGN Savings Bond, N340.42 billion. FGN raised about N29.64 billion from the sale of NTBs and N8.17 billion from Sovereign Sukuk rental in the same period.
On the other hand, actual external debt service payment in the first quarter stood at $584.79 billion. Commercial loans took the Lion’s share at 44.86 percent or $246.16 billion while multilateral loans gulped 31.58 percent valued at $173.34 billion. About $129.29 billion was spent on servicing bilateral loans in the first quarter of 2022. It accounts for 23.56 percent of the total spent on loan servicing in the review period.
Lagos leads highly indebted states
The domestic debt portfolio of the 36 States of the Federation and the Federal Capital Territory increased to N4.84 trillion in the first quarter of 2022 with Lagos State, the nation’s commercial nerve, accounting for more than 16 percent of the Sub-nationals’ total debt stock. Lagos State’s domestic debt stood at about N780.48 billion in the review period according to the DMO. Ogun State emerged second among the top 10 highly indebted states in the review period, with N241.98 billion while oil-rich Rivers State owes N225.51 billion to local creditors. Other highly indebted States are Imo, N204.61 billion; Akwa Ibom, N203.11 billion; Delta, N163.11 billion; Cross River, N158.93 billion; Plateau, N152.09 billion, Oyo, N141.19 billion and Benue, N140.68 billion.
Ebonyi emerged the least indebted state with about N41.63 billion at the end of March 2022. Other states with less debt burden like Ebonyi are Jigawa, N42.73 billion; FCT, N51.15 billion; Nasarawa, N57.14 billion and Anambra, N58.28 billion. Also ranking among the least indebted states are Ondo, N62.32 billion; Kebbi, N63.47 billion; Sokoto, N64.06 billion; Katsina, N66.68 billion and Kaduna, N72.4 billion.
Analyst’s remarks
Gabriel Okeowo, Principal Lead Analyst at Budgit noted that only three states in the country can meet their operating expenses obligations with a combination of their IGR and Value Added Tax as at 2021. The states, according to Budgit’s research are Lagos, Rivers and Anambra.
Okeowo disclosed that the majority of the states need to do more to rapidly consolidate on any ongoing strategies to improve their IGR and by extension, their viability as federating entities.
“This is necessary considering the comparative size of their operating expenses and the global push to transition away from fossil fuels like crude oil, a key source of federally distributed revenue,” he said.
His words: “The states at the bottom include Jigawa, Delta, Benue, Taraba and Bayelsa. Nevertheless, all Nigerian states still need to work hard to build economic prosperity and create more jobs in their states to ensure that there is more money in circulation and economic activities that can be taxed to improve their IGR.
“Eight of these eleven states mentioned are in the north, while three are in the south. We note that a low debt burden in itself is not necessarily a good or a bad thing; however, these states are highlighted because they still have comparatively more leeway to borrow. Thus, they need additional technical support to be more strategic in their future borrowing to ensure value for money.
“Additionally, states at the bottom ranking have a high debt burden when compared with their 2020 total revenue. These states will need to urgently develop Public-Private Partnership (PPP) models for financing expenditures in critical sectors, as their attractiveness to potential lenders is significantly reduced. The least attractive states in this regard are Cross River, Plateau, Imo, Adamawa and Bauchi, and they would need the most support from local and international development partners to build their capacity to leverage different Public-Private Partnership models for effective and affordable public service delivery.”
IMPORTANT NOTES:
1. This Domestic Debt Data Report is generated from the signed-off received from the 36 States of the Federation and FCT.
2. Domestic Debt Stock for Thirty three (33) States of the Federation and FCT: Abia, Adamawa, Akwa Ibom, Anambra, Bauchi, Bayelsa, Benue, Borno, Cross River, Delta, Ebonyi, Edo, Ekiti, Gombe, Imo, Jigawa, Kaduna, Kano, Kebbi, Kogi, Kwara,Lagos, Nasarawa, Niger, Ogun, Ondo, Osun, Oyo, Plateau, Sokoto, Taraba, Yobe, Zamfara and the FCT were as at March 31, 2022.
3. The Domestic Debt Stock Figures for Katsina and Enugu States were as at December 31, 2021.
4. Domestic Debt Stock Figures for Rivers State were as at September 30, 2021.
