Connect with us


Spotlight on Nigeria’s Public Debt Stock – Coronation Merchant Bank



Muhammadu Buhari

According to Nigeria’s Debt Management Office (DMO), Nigeria’s total public debt rose by 4.1% or N1.5trn from N38trn at end-September ‘21 to N39.5trn at end-December 2021. The total public debt increased by 20.2% or N6.6trn when compared to the corresponding period in 2020. As at end-2021, public debt is equivalent to 22.5% of 2021 nominal GDP.

This is in line with the DMO’s debt management target of a debt-to-GDP ratio of 40% of GDP for the period 2020-2023 and below the limit of 55% set by the World Bank for countries within Nigeria’s peer group. It is also below the 70% set by the Economic Community of West African States. According to the DMO, disbursements by multilateral
and bilateral creditors account for a significant portion of the increase in the debt stock.

Total domestic debt increased by 17.3% y/y from N20.2trn in 2020 to N23.7trn at end2021. This constitutes 59.9% of total public debt. On a q/q basis, it increased by 5.7%, on the back of increased issuances of FGN bond and Nigerian treasury bills (NTBs) in Q4 ’21.

In terms of composition, FGN domestic debt constitutes 81.2% of total domestic debt, while states and FCT make up the remaining 18.8%. Bonds and NTBs make up 92.2% of total FGN domestic debt while FGN sukuk, treasury bond, savings bond, green bond, and promissory notes make up the remaining 7.8%.

The share of states and the FCT’s domestic debt increased by 6.2% q/q to N4.5trn from N4.2trn at end-September ‘21. On a y/y basis, it increased by 6.5%. The most indebted states were Lagos (N658bn), Ogun (N232bn) and Rivers (N225bn).

Coronation Merchant Bank notes that with the securitisation of the ways and means advances from the CBN and the addition of AMCON debt, the domestic debt stock is likely to increase. As at end-2021, the stock of CBN’s ways and means advances stood at N13.3trn.

External debt stock stood at USD38.3bn (N15.8trn) at end-2021. This points towards increases of 1.8% q/q and 24.7% y/y. The rise was largely due to the USD4bn Eurobonds issued by the FGN in September ’21, as part of new external borrowing in the 2021 appropriation act.

The external debt stock accounts for 40.1% of total public debt. Multilateral and bilateral loans account for the bulk of the external debt at 60.2%, while commercial loans and promissory notes represent the remaining 39.8%.
Insufficient revenue continues to hamper Nigeria’s fiscal landscape, resulting in one of the highest debt-service-to-revenue ratio among African economies.

Nigeria spent N2.9trn on servicing domestic debts, and N877.5bn on external debt servicing. As at November ’21, the FGN’s debt service to revenue ratio was 76%.

The FGN’s 2022 aggregate expenditure is estimated at N17.1trn. Revenue is expected to be N10.7trn, and the deficit of N6.4trn is expected to be financed by foreign borrowings of N2.57trn, domestic borrowings of N2.57trn, privatisation proceeds of N90.7bn, and multi-lateral /bi-lateral loan drawdowns of N1.16trn. We note that the 2022 FGN budget contains a provision of N443bn for subsidy for January-June. President Buhari is seeking approval of an additional N2.5trn supplementary budget to cater for fuel subsidy.

Last week, The DMO announced that Nigeria raised USD1.25bn (N520bn) through Eurobonds. This makes Nigeria the first African country to access the international capital market (ICM) in 2022. The order book reached USD3.7bn. It included quality investors across the United States, Europe, and Asia. According to the DMO, the proceeds of the Eurobond will be used to finance critical capital projects in the budget. Additionally, it would
contribute directly to external reserves.

Despite the increase in the total public debt stock, as a percentage of GDP (22.5%), this is relatively low when compared with other African economies such as Ghana (81%), Kenya (65%), South Africa (80%) and Egypt (90%). The onus is on the FGN to ensure that borrowed funds are used productively.

Coronation Merchant Bank notes the FGN’s strategic revenue growth initiatives such as the Finance Act and other measures aimed at leveraging technology and automation in improving tax administration, as well as the introduction of a pro-health tax (excise duty on carbonated drinks). These among others are geared towards improving government revenue.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading


Federal Government Set to Seal $3.8bn Brass Methanol Project Deal in May 2024




The Federal Government of Nigeria is on the brink of achieving a significant milestone as it prepares to finalize the Gas Supply and Purchase Agreement (GSPA) for the $3.8 billion Brass Methanol Project.

The agreement to be signed in May 2024 marks a pivotal step in the country’s journey toward industrialization and self-sufficiency in methanol production.

The Brass Methanol Project, located in Bayelsa State, is a flagship industrial endeavor aimed at harnessing Nigeria’s abundant natural gas resources to produce methanol, a vital chemical used in various industrial processes.

With Nigeria currently reliant on imported methanol, this project holds immense promise for reducing dependency on foreign supplies and stimulating economic growth.

Upon completion, the Brass Methanol Project is expected to have a daily production capacity of 10,000 tonnes of methanol, positioning Nigeria as a major player in the global methanol market.

Furthermore, the project is projected to create up to 15,000 jobs during its construction phase, providing a significant boost to employment opportunities in the country.

The successful execution of the GSPA is essential to ensuring uninterrupted gas supply to the Brass Methanol Project.

Key stakeholders, including the Nigerian National Petroleum Company Limited and the Nigerian Content Development & Monitoring Board, are working closely to finalize the agreement and pave the way for the project’s advancement.

Speaking on the significance of the project, Minister of State Petroleum Resources (Gas), Ekperikpe Ekpo, emphasized President Bola Tinubu’s keen interest in expediting the Brass Methanol Project.

Ekpo reaffirmed the government’s commitment to facilitating the project’s success and harnessing its potential to attract foreign direct investment and drive economic development.

The Brass Methanol Project represents a major stride toward achieving Nigeria’s industrialization goals and unlocking the full potential of its natural resources.

As the country prepares to seal the deal in May 2024, anticipation grows for the transformative impact that this landmark project will have on Nigeria’s economy and industrial landscape.

Continue Reading


IMF Report: Nigeria’s Inflation to Dip to 26.3% in 2024, Growth Expected at 3.3%



IMF global - Investors King

Nigeria’s economic outlook for 2024 appears cautiously optimistic with projections indicating a potential decrease in the country’s inflation rate alongside moderate economic growth.

The IMF’s revised Global Economic Outlook for 2024 highlights key forecasts for Nigeria’s economic landscape and gave insights into both inflationary trends and GDP expansion.

According to the IMF report, Nigeria’s inflation rate is projected to decline to 26.3% by the end of 2024.

This projection aligns with expectations of a gradual easing of inflationary pressures within the country, although challenges such as fuel subsidy removal and exchange rate fluctuations continue to pose significant hurdles to price stability.

In tandem with the inflation forecast, the IMF also predicts a modest economic growth rate of 3.3% for Nigeria in 2024.

This growth projection reflects a cautious optimism regarding the country’s economic recovery and resilience in the face of various internal and external challenges.

Despite the ongoing efforts to stabilize the foreign exchange market and address macroeconomic imbalances, the IMF underscores the need for continued policy reforms and prudent fiscal management to sustain growth momentum.

The IMF report provides valuable insights into Nigeria’s economic trajectory, offering policymakers, investors, and stakeholders a comprehensive understanding of the country’s macroeconomic dynamics.

While the projected decline in inflation and modest growth outlook offer reasons for cautious optimism, it remains essential for Nigerian authorities to remain vigilant and proactive in addressing underlying structural vulnerabilities and promoting inclusive economic development.

As the country navigates through a challenging economic landscape, concerted efforts towards policy coordination, investment promotion, and structural reforms will be crucial in unlocking Nigeria’s full growth potential and fostering long-term prosperity.

Continue Reading


South Africa’s March Inflation Hits Two-Month Low Amid Economic Uncertainty



South Africa's economy - Investors King

South Africa’s inflation rate declined to a two-month low, according to data released by Statistics South Africa.

Consumer prices rose by 5.3% year-on-year, down from 5.6% in February. While this decline may initially suggest a positive trend, analysts caution against premature optimism due to various economic factors at play.

The weakening of the South African rand against the dollar, coupled with drought conditions affecting staple crops like white corn and geopolitical tensions in the Middle East leading to rising oil prices, poses significant challenges.

These factors are expected to keep inflation relatively high and stubborn in the coming months, making policymakers hesitant to adjust borrowing costs.

Lesetja Kganyago, Governor of the South African Reserve Bank, reiterated the bank’s cautious stance on inflation pressures.

Despite the recent easing, inflation has consistently remained above the midpoint of the central bank’s target range of 3-6% since May 2021. Consequently, the bank has maintained the benchmark interest rate at 8.25% for nearly a year, aiming to anchor inflation expectations.

While some traders speculate on potential interest rate hikes, forward-rate agreements indicate a low likelihood of such a move at the upcoming monetary policy committee meeting.

The yield on 10-year bonds also saw a marginal decline following the release of the inflation data.

March’s inflation decline was mainly attributed to lower prices in miscellaneous goods and services, education, health, and housing and utilities.

However, core inflation, which excludes volatile food and energy costs, remained relatively steady at 4.9%.

Overall, South Africa’s inflation trajectory underscores the delicate balance between economic recovery and inflation containment amid ongoing global uncertainties.

Continue Reading