We continue our discussion on Nigeria’s debt profile. According to data published by the Debt Management Office (DMO) last week, the FGN’s domestic debt stock totalled NGN20.9trn (USD50.5bn), roughly equivalent to 12.1% of 2021 GDP. The FGN’s accumulation of domestic debt continues to rise unabatedly. In Q2’22, the FGN’s domestic debt increased by 19% y/y and accounted for c.80% of the nation’s domestic debt. The key driver has been the DMO’s record issuance of FGN bonds at monthly primary market auctions this year. The agency issued NGN1.6trn (ex. non-competitive bids) in FGN Bonds during H1 '22. This compares with NGN1.1trn issued over the same period last year. 

FGN bonds accounted for 72.5% of the FGN’s domestic debt, down from 75.1% as at June 2021, but up from 70.7% as at March 2021. Nigerian Treasury bills (NTBs) made up 21.5% compared with 17.0% in the year-earlier period.

The balance consists of FGN Sukuk bonds (2.92%), promissory notes (2.46%), and smaller sums from Treasury bonds, Savings bonds, and Green bonds (c.0.59%).

The domestic debt balance excludes bonds issued by AMCON (held by the CBN), and other public agencies, and the CBN's ways and means advances used to cover the unfunded portion of the FGN's budget deficit. Including these would bring the FGN’s domestic debt stock to around 26% of GDP.

While the level of debt in relation to GDP seems acceptable, the narrative is undermined by insufficient revenue collection, which, as we noted in our earlier note (Good Morning Nigeria, 23 September 2022), leads to an unwieldy debt-service-to-revenue ratio.

The FGN's retained revenue to GDP was a paltry 2.7% of GDP in 2021, one of the lowest in the world. In comparison, similar ratios for South Africa, Kenya, and Ghana were 28.1%, 16.8%, and 13.8% respectively in 2020, according to World Bank data.

Looking ahead, we continue to anticipate a significant increase in the FGN's domestic debt profile because of ongoing revenue underperformance in comparison to expenditures and the difficulties in accessing loans on the international debt market.

According to CBN data, the FGN's total revenue and expenditure between January and May were NGN1.9trn and NGN4.7trn respectively, with an implied fiscal deficit of NGN2.6trn, or 3.9% of GDP on an annualised basis (above the 3% suggested in the Fiscal Responsibility Act).