Federal, state governments owe N9tn

Nigeria’s total public debt rose from N6.25tn ($40.1bn) in 2010 to N9.04tn ($58.04bn) by the end of December 2012, the Debt Management Office has said. The DMO, in its 2013 Report of the Annual National Debt Sustainability Analysis, released in Abuja on Sunday, also said it would issue $100m Diaspora bond in 2014.

The total public debt stock includes both external and domestic debts owed by the federal and state governments as well as the Federal Capital Territory. Over a period of three years – 2010 to 2013 – the nation has had to part with N2.21tn ($14.17bn) in debt service payments. “Nigeria’s total debt stock – domestic and external for the federal, states and the FCT as of end-December 2012, stood at $58,044.58m, representing an increase of $8,624.72m or 17.45 per cent over the amount recorded as of the end of December, 2011,” it stated. For the first time, the DMO, which had been helping states to reconstruct their debts put the domestic debt profile of the states and the FCT at N1.47tn ($9.45bn). The DMO said the Federal Government’s contingent liabilities totalled N3.67tn. Furthermore, it disclosed that the N15.58 ($100m) Diaspora bond would help Nigerians based abroad to identify with the development strides in the nation. As of December 31, 2012, the nation’s total public debt stood at N9.04tn ($58.04bn), the DMO said. This represented an increase of N1.3tn ($8.62bn) or 17.45 per cent over the amount recorded at the end of December 2011 N7.47tn ($49.42bn). The external debt component increased by $860.49m or 15.19 per cent over the amount recorded in 2011 to reach $6.53bn in 2012. The breakdown of the total public debt showed that the Federal Government accounted for N6.5tn ($41.97bn) or 72.43 per cent, while that of the states and the FCT stood at N1.47tn ($9.45bn) or 16.31 per cent. A further breakdown showed that the share of the domestic and external debt stood at 88.74 per cent and 11.26 per cent, respectively. The Debt Sustainability Analysis report stated, “The share of the domestic debt has continued to dominate the trend in the total public debt since 2008. The total debt stock of the Federal Government and the states, as a percentage of the Gross Domestic Product, maintained an upward trend from 10.47 per cent to 22.43 per cent in 2012. “However, compared to the global threshold of 40 per cent (which relates to only external debt sustainability) set for medium performers, Nigeria’s total public debt still remained within sustainable limits. The total public debt/GDP ratio was below the country-specific threshold of 25 per cent.” The DMO said that the debt service payments of the Federal Government, the states and the FCT rose to N864.47bn ($5.55bn) or 24.25 per cent in 2012 from N685.34bn ($4.47bn) in 2011. The debt service payment stood at N638.62bn ($4.15bn) in 2010. Of the total debt service in 2012, the Federal Government and the states’ domestic debt service accounted for 94.72 per cent, while the balance of 5.28 per cent went to external debt service. The total domestic debt service at the end of December 2012 stood at N720.55bn, indicating an increase of 34.08 per cent over the level in 2011. The total domestic debt service of the Federal Government as a percentage of the total domestic debt stock outstanding was 11.02 per cent in 2012, which was higher than the 9.56 per cent recorded in 2011. According to the DMO, the significant rise in 2011 and 2012 was due to the increase in the cost of borrowing occasioned by the contractionary monetary policy regime, particularly the upward review of the benchmark Monetary Policy by the Central Bank of Nigeria from 6.25 to 12 per cent. The DMO stated, “The external debt service showed a downward trend, while that of the domestic debt increased significantly. “The decrease in the external debt service was largely attributable to full redemption of some IBRD (International Bank for Reconstruction and Development) and ADB(African Development Bank) loans over the period and the reliance on the domestic bond market to largely meet the Federal Government’s borrowing requirements since 2002.” The DMO reported that the Federal Government’s contingent liabilities rose from N2.59tn in 2010 to N3.48tn in 2011. The liabilities further increased to N3.67tn in 2012. Contingent liabilities are obligations that may be incurred in the future depending on the outcome of certain events. The DMO listed the contingent liabilities of the Federal Government as pension liabilities, N1.32tn (2012); local contractors, N233.94bn; pending litigation, N92bn; federal mortgage, N32bn; guarantee on agriculture, N249.58bn; and AMCON guaranteed bonds, N1.74tn. The DMO said, “As part of the efforts to address the issue of contractors’ arrears, the Federal Government had set up a private sector driven Special Purpose Vehicle to issue a five-year split coupon bond with a face value of N233.94bn, which was guaranteed in favour of the bondholders. “There is an arrangement by the Federal Government to redeem the bond at maturity through annual budgetary provisions.” At a workshop on Friday, the Director-General, DMO, Dr. Abraham Nwankwo, said that the organisation would issue a special bond in the first quarter of 2014. The bond, which has been approved by the National Assembly as part of the 2013–2015 Medium Term Expenditure Framework Strategy, will enable Nigerians based abroad to invest in projects they can identify with in the country. Explaining the attractiveness of the Nigerian bond market, Nwankwo said by the end of 2012, 19 per cent of the bonds issued by the country were held by foreign investors. He also justified the need to garner resources from all available sources to close the huge infrastructure gap, adding that the country required about $35bn to fund development in the next 10 years