The fresh $16.23 billion and 1.02 billion approved for the Federal Government will push Nigeria’s debt stock to N52.6 trillion when drawn; it was learnt at the weekend.
President Muhammadu Buhari got an approval last Wednesday from the Senate to take the loans to finance legacy projects.
According to investigation conducted by this newspaper, the debt portfolio will balloon to N52.6 trillion when the federal government harvests all the pending loans approved by the National Assembly and debts written against it by creditors like the Central Bank of Nigeria (CBN).
The latest approval raised the debt stock from N35.465 trillion to N42.619 trillion.
The N35.465 trillion debt burden is made up of N13.711 trillion representing 38.66 per cent external debts and N21.754 trillion (representing 61.34 per cent of the domestic debt component.
However, there is the smoldering issue of what the federal government’ indebtedness to the CBN running into N10 trillion. The CBN is banker to the federal government and lends money to the government from time to time (usually at commercial terms).
“When all these liabilities are summed up, the federal government debt will be a princely sum of N52.6 trillion”, a source told The Nation at the weekend.
Relying a Debt Management Office (DMO) data, when the debt was N33.10 trillion, N12.71 trillion (or 38.60 per cent) of the debt was from external sources while N20.21 trillion (or 61.40 per cent) of the debt stock was the domestic component.
These figures will change as soon as the federal government acquires these new loans.
The 36 states and the Federal Capital Territory (FCT) have a collective domestic debt stock of N4.19 trillion as at March, 2021. This too will increase over time as many states have indicated interest to borrow from outside the country.
In the first quarter the, $4.06 billion was owed to the bilateral institutions; $11.17 billion are commercial debts (comprising Eurobonds and Diaspora Bonds) and $186.70 million are designated Promissory Notes.
Before drawing down the newly-approved loans, the country will be owing multilateral institutions like the World Bank (World Bank Group- IDA $11,123.04 million, IBRD $409.74 millon), International Monetary Fund (IMF) $3,535.23 million and bilateral institutions like, France (AFD) $493.71 million, Exim Bank of China$3,264.16 million, Japan (JICA)$80.20 million; Exim Bank of India) $37.00 million and Germany (KFW) $184.32 million.
It was learnt that plans are already afoot to add federal government’s debt to the CBN of about N10 trillion to the stock of debts in the country’s books.
The federal government’s component of external debt is put at N11.828 trillion while its domestic debt stock is currently put at N17.632 trillion. These will change when the new loans come in.
States and FCT external debt stood at N1.883 trillion, while their domestic debt stock is N4.122 trillion.
The bulk of the debt (54.88 per cent) is owed to multilateral institutions like the World Bank Group and the African Development Bank (AfDB) Group.
Commercial debts like Eurobonds and Diaspora bonds make up 31.88 percent of total debts; while bilateral loans from China, France, Japan, India and Germany account for 12.70 per cent and Promissory Notes 0.54 per cent of total debt stock.
DMO Director-General Ms. Patience Oniha once said: “The Sovereign Eurobonds serves as a benchmark on the back of which several local banks have issued Eurobonds. Amongst them are Zenith Bank, Access Bank, UBA, FBN, Ecobank Nigeria and Fidelity Bank.
“This window opened by the sovereign enabled these Nigerian Banks raise Tier 2 Capital to meet regulatory requirement and enhanced their capacity to lend to, and, support local borrowers.”
Speaking further on the benefits of raising money from the Eurobond market, Ms. Oniha argued: “Issuing Eurobonds has been a potent tool for building up Nigeria’s External Reserves. A healthy level of External Reserves supports the Naira Exchange Rate and Nigeria’s sovereign rating.
“Raising funds externally through Eurobonds to finance Budget Deficits reduces the level of sovereign borrowing in the domestic markets. The benefits of these are many as it mitigates the risk of crowding out the private sector (more funds available at moderate rates for other borrowers in the domestic economy)
“The Eurobonds are also listed in Nigeria’s two securities exchanges: The Nigerian Exchange Limited and FMDQ Securities Exchange Limited. This increases the size of these exchanges and the diversity of instruments listed.”
“The Eurobonds are actually issued as part of approved Government Borrowing Plan usually in the FGN’s Annual Budgets, for financing capital projects thereby reducing the infrastructure gap.”
On the rising debt, high debt service to revenue ratio and utilisation of borrowed funds, the DMO boss said members of the public should not forget the borrowing became necessary in order to address, ”huge Infrastructure deficit, recession (twice in the last six years), consecutive budget deficits , low revenue base, compounded by dependence on one source – crude oil which prices crashed and at a point, at the peak of the COVID-19 pandemic had no buyers.”
She however lamented that the, “five per cent tax as a percentage of the Gross Domestic product (GDP) was too poor for Nigeria and concerted efforts must be made to increase the nation’s revenue.
“We are working towards recognising it, getting the proper approvals to include it in the public debt stock. Where we are is to get the necessary approvals to convert it into a tenured debt.”
– The Nation