Nigeria’s public debt stock reached N39.556 trillion on December 31, 2021, the Debt Management Office (DMO) has said, pushing the country closer to the debt crisis.
This comes on the heels of a fresh Eurobond issued by Nigeria in the International Capital Market (ICM), which pushed the total debt to more than N40 trillion. Nigeria issued $1.250 billion (N520 billion) seven-year Eurobond in addition to about N950 billion the federal government borrowed from the domestic market.
The N950 billion was borrowed to fund the N6.39 trillion budget deficit in the 2022 budget, the DMO said. Adding the fresh Eurobond up to the N950 billion puts Nigeria’s total public debt at N41.026 trillion.
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The new debt figures were made known to journalists in Abuja on Friday by the DMO’s Director General, Ms. Patience Oniha. According to her, the proceeds of the Eurobond would be used to finance critical capital projects in the 2022 Budget to bridge infrastructure deficit and strengthen Nigeria’s economic recovery.
Giving further details, the DMO said in a statement that the Eurobond offer was launched at an initial price of 8.75 per cent per annum, and on the back of strong investor demand, Nigeria was able to revise the price guidance to 8.5 per cent per annum.
The debt management office said the Order Book, which included many quality investors in the US, Europe and Asia, continued to grow, reaching a peak of $4 billion.
“With this strong investor interest, the price was tightened to 8.375 per cent per annum, the Order Book still remained high at 3.676 billion and retained the quality investors. Nigerian investors also participated in the Offer with a total subscription of $60 million.
“The proceeds of the Eurobond will be used to finance critical capital projects in the Budget to bridge the deficit in infrastructure and strengthen Nigeria’s economic recovery.
“Equally important, it would contribute directly and in full to the level of Nigeria’s external reserves,” the DMO said.
The new fuel subsidy regime, orchestrated by the rise in oil prices, created a N6.39 trillion deficit in the 2022 budget that the government has taken to borrowing from both international and domestic sources to fill.
The sum of N2.57 trillion is to be borrowed from domestic sources and another N2.57 trillion from foreign sources, while the government hopes to draw down N1.16 trillion from multilateral/bi-lateral loans and harvest N90.7 billion from privatization proceeds to fund the deficit.
Nigerian public debt stock has been bloating with unusual speed year over year since the past 5 years, as it becomes the means of funding the budget. Ms. Oniha noted that the comparable figure for December 2020 was N32.915 trillion or $86.392 billion. The N39.556 trillion debt recorded as of December 31, 2021, was N1.566 trillion higher than the N38 trillion recorded as of September 30, 2021, even as Debt-to-GDP stood at 22.47 per cent as of December 31, 2021.
Ms. Oniha explained that the public debt stock for December 31, 2021, included new borrowings by the Federal Government of Nigeria (FGN) and sub-nationals, adding that for the FGN, the 2021 Appropriation and Supplementary Acts included total borrowing from domestic and external sources of N5.489 trillion to part-finance the deficit.
“Borrowings for this purpose and disbursements by multilateral and bilateral creditors account for a significant portion of the increase in the debt stock. Increases were also recorded in the debt stock of the states and the FCT.
“The new borrowings were raised from diverse sources, primarily through the issuance of the Eurobonds, Sovereign Sukuk and FGN Bonds. These capital raising were utilized to finance capital projects and support economic recovery.
“With total public debt stock to Gross Domestic Product (GDP) as at December 31, 2021, of 22.47 per cent, the Debt-to-GDP ratio still remains within Nigeria’s self-imposed limit of 40 per cent.
“This ratio is prudent when compared with the 55 per cent limit advised by the World Bank and the International Monetary Fund ((IMF) for countries in Nigeria’s peer group, as well as the ECOWAS Convergence Ratio of 70 per cent,” she said.
Allaying fears about Nigeria’s growing debt, Ms. Oniha said the federal government was mindful of the relatively high debt-to-revenue ratio and had initiated various measures to increase revenues through the Strategic Revenue Growth Initiative and the introduction of the Finance Acts since 2019.
However, the major concern of the government currently is the rising oil prices that has been stoked by the Russia-Ukraine crisis, and will likely create further budget deficits as sanctions against Russia further increase oil prices.
Nigeria’s hope to end the importation of refined petroleum products in the near future is not certain and Africa’s largest economy has failed to meet its Organization of Petroleum Exporting Countries (OPEC)’s quota. This means that Nigeria will continue to borrow to fund its budget and infrastructural projects.