External Debt Almost Two-thirds Concessionary

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Tuesday, September 15, 2020 / 10:20 AM / by FBNQuest Research / Header Image Credit: Ecographics

 The FGN's external debt obligations increased by US$3.8bn in Q2 2020 to US$31.5bn. We see from the DMO's data release that the driver was the disbursement of US$3.4bn by the IMF within its rapid financing instrument (RFI) to tackle external shocks such as Covid-19. (The RFI is free of policy conditionality, which explains why it is available to all members other than those in arrears to the Fund such as Zimbabwe.) There were also increases of US$360m and US$120m in net obligations over the quarter to the World Bank group and Exim Bank of China.                                                                                   

In the absence of new commercial borrowing, the share of the external debt stock that is due to multilateral and bilateral creditors, principally the World Bank Group, on concessionary terms has again risen. The ratio rose from 59.6% in Q1 2020 to 64.5%.

The budget projects external borrowing of US$5.5bn. Beyond the RFI and US$290m approved by the African Development Bank (AfDB) group out of US$500m requested, it hopes to navigate its way around conditionality, led by fx policy, and secure multilateral loans from the World Bank and others.            

The FGN has pledged not to tap the Eurobond market this year. We hope that it will refinance a Eurobond maturity in January with a new issue. It did not accept the G20 offer of bilateral debt relief and did not ask private creditors for comparable treatment. That way, it protected its market standing.

FGN external debt by lender group, Jun 2020 (% shares)

Sources: Debt Management Office (DMO); FBNQuest Capital Research

The DMO has started to share data covering external loans approved but not yet disbursed. The total from Exim Bank of China is US$1.26bn and JPY2.3bn including one for rice processing plants signed as long ago as April 2016.

A note put out by S&P in June informs us that Nigeria had the fifth highest stock of public external debt in Africa at end-2019. Egypt topped the table with over US$60bn, with Angola, Kenya and Ethiopia all ahead of Nigeria.