- PwC allays fears over Nigeria’s refinancing plan
Following the Federal Executive Council’s recent approval of a plan to issue $3bn worth of foreign bonds of up to three years’ maturity to refinance maturing naira-denominated treasury bills, consultancy firm, PwC Nigeria, says the impact of the action on debt sustainability is likely to be modest.
The firm, in its Economic Alert released on Wednesday, said the decision was in line with the Federal Government’s debt management strategy to rebalance its debt portfolio for domestic and foreign debts, from the current 69 per cent: 31 per cent to a targeted 60 per cent: 40 per cent.
Although this plan is yet to be approved by the National Assembly, PwC said, “We expect that if implemented, it would have a modest impact on broad debt sustainability indicators. Although timelines are not clear, we suspect issuance is unlikely to be earlier than 2018, given the extensive preparatory work required in issuing international sovereign bonds.
“Consequently, we assume the impact on public debt ratios would become evident as from 2018. We estimate that Nigeria’s stock of treasury bills would be around N3.8tn by end of 2017. Refinancing $3bn worth of maturing bills with dollar borrowing would result in a reduction in this stock by as much as nine per cent.”
External debt on the other hand, the firm noted, would increase by 46 per cent to N6.31tn ($20.6bn) by end of 2018.
“Under this scenario, debt to the Gross Domestic Product rises by three percentage points, from an estimated 16 per cent in 2017 to 19 per cent in 2018. Nonetheless, the impact on the cost of debt is likely to be muted,” it added.