The Debt Management Office (DMO)’s latest quarterly data show a 34 per cent year-on-year (y/y) increase in the FGN’s domestic debt service, to hit a new high of N808 billion in the third quarter of 2021.
According to Proshare, the debt service payments peak in the first and third quarters of the year, when the issuance of FGN bonds has been concentrated. The surge in domestic debt service recorded in the third quarter was largely as a result of principal repayments in July 2021 worth N130 billion. The stock of total domestic debt increased by 3.4 per cent over the same period, and of FGN bonds by 1.6 per cent.
Domestic payments accounted for 52 per cent of total debt service as at November ’21. The figure rises to 60 per cent if we include interest payments on the FGN’s ways and means advances from the CBN.
The decline in service payments for NTBs (Nigerian T-bills) continued in Q3. We saw a -73.1 per cent y/y decline to N26 billion.
Nigeria’s heavy debt service bill is a weak point in its credit story, particularly as government revenue took a hit because of the pandemic and its accompanying restrictions on economic activities.
The government has consistently opined that the country’s challenge in this regard is not one of debt, but of revenue. Nigeria’s total debt service-to-revenue ratio stood at 76 per cent as at November 2021. The implication is that, for every 100 kobo the country rakes in, 76 kobo goes for debt servicing.
The country’s total debt-to-GDP ratio was put at 30 per cent as at September 2021. This is significantly lower than the World Bank’s recommended threshold of 64 per cent for emerging markets.
