Nigeria’s Exposure to Commercial Loans Rises by $7.3bn in 3 Years

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Ndubuisi Francis in Abuja

Nigeria’s exposure to commercial foreign loans rose by $7.3 billion or 486.67 per cent in the last three years, data from the Debt Management Office (NBS) has shown.

From $1.5 billion as at June 30, 2015, commercial loans stood at $8.8 billion by June 30 2018.

The nation’s foreign debt component also posted an increase of $11.77 billion during the same period.

Nigeria’s external debt, the DMO stated, grew from $10.32 billion as at June 30, 2015 to $22.08 billion as at June 30, 2018.
This translated to a growth of 114.05 per cent in the last three years.

According to the DMO figures posted on its website, while multilateral debt accounts for $10.88 billion or 49.28 per cent of Nigeria’s foreign debt profile, the greatest chunk of the increases in the last three years were traceable to commercial loans.

Commercial foreign loans, which stood at $1.5 billion as of June 30, 2015 recorded a $8.8 billion increase as at June 30, 2018, an indication that in the past three years, Nigwria’s exposure to commercial foreign loans posted a $7.3 billion or 486.67 per cent rise.

The World Bank accounted for 38.36 per cent of the nation’s foreign debt portfolio, with a commitment of $8.47 billion, even as the country is exposed to other multilateral organisations, including the African Development Bank (AfDB’s) $1.32 billion and that of African Development Fund ($843.47 million).

Nigeria is also indebted to the International Fund for Agricultural Development (IFAD) to the tune of $159.44 million; the Arab Bank for Economic Development ($5.88 million); the EDF Energy (France) with a portfolio of $64.96 million and the Islamic Development Bank with a portfolio of $16.92 million.

However, Nigeria’s bilateral debt account for $2.39 billion or 10.87 per cent of the country’s external debt exposure.

Such bilateral agencies include the Export-Import Bank of China ($1.91 billion); Agence Francaise de Development ( $274.98 million), Japan International Cooperation Agency ($74.69 million); the EXIM Bank of India ($4.76 million); and Germany (KFW),$132.24 million).

The latest debt statistics point towards a marginal decrease in the domestic component of the country’s total public due to efforts to rebalance the local/foreign debt ratio in the ratio of 70:30.

The DMO stated that there was a decrease in the federal government’s domestic debt, from N12.59 trillion in December 2017 to N12.58 trillion in March 2017 and N12.15 trillion in June 2018.

The reduction in the FGN’s domestic debt stock, the DMO explained, arose from the redemption of N198 bn Nigerian Treasury Bills in December 2017 and another N639 billion between January and June 2018.

A total of $3 billion was raised through Eurobonds to refinance maturing domestic debt as part of the implementation of the debt management strategy for the purpose of substituting high cost domestic debt with lower cost external debt to reduce debt service costs for the government, the DMO said.

The implementation of the Public Debt Management Strategy, whose overall objective is to ensure that Nigeria’s debt is sustainable, the DMO noted, is already yielding positive results.

Meanwhile, the federal government has offered for subscription two-year savings bond at 11.36 per cent and three-year savings bond at 12.36 per cent, the DMO has said.

The offer circular pasted on the DMO website showed that the two-year bond will be due in September 2020 while the three-year bond mature in September 2021.

The DMO disclosed that the maximum subscription was N50 million at N1,000 per unit, subject to minimum subscription of N5,000 and in multiples of N1,000.

According to the DMO, the bond is fully backed by the full faith and credit of the federal government, with quarterly coupon payments to bondholders.

The savings bond issuance is expected to help finance the nation’s budget deficit as well as part of the federal government’s programme targeted at the lower income earners to encourage savings and also earn more income (interest), compared to their savings accounts with banks.

According to the circular, the offer closes on Friday.