On a 9M basis, the FGN’s external debt service payments amounted to almost USD2.1bn or an increase of 15% y/y. A breakdown of the amount shows USD1.3bn and USD793m in market and non-market related debt payments respectively.

Interest and fee payments (excluding principal repayments) amounted to USD1.48bn over the twelve months to Sept ‘22, implying an annualised average interest rate of 3.8%.

This compares with roughly 13.5% for domestic loans. The lower cost of external debt service does not consider exchange rate risk.

The low single-digit interest rate reflects the fact that almost 60% of total external debt is due to multilateral and bilateral lenders on concessional terms.

For instance, we calculate the average annualised borrowing cost for the World Bank Group at 1.8%, and the African Development Bank Group at 1.7%.

Based on the DMO’s data, the external debt service payments account for around 30% of total debt service cost for 9M ’22.

The FGN’s 2023 budget envisages additional foreign loans of NGN1.76trn, and another NGN1.77trn in loans from concessional lenders.

However, due to elevated market yields and tight financial market conditions, the FG will not be able to tap the Eurobond market this year.