Nigeria’s external debt chasing $45bn mark by year’s end – DMO 

There are strong indications that Nigerias external debt may hug $45.1bn by the end of the year, as the country’s central government advances towards obtaining additional external loans.

Pointers in this direction cane to light from the latest report from the Debt Management Office, which revealed that the country’s external debt stock increased by $780m in the second quarter of 2024, moving up from $42.12bn in March to $42.9bn in June, last Sunday Punch reported.

Last Thursday, the Federal Executive Council (FEC) approved a $2.2bn external borrowing plan as part of the Federal Government’s 2024 Appropriation Act financing programme.

The Minister of Finance, Wale Edun, announced the decision during a briefing with State House correspondents after the FEC meeting at the Aso Rock Villa in Abuja.

According to Edun, the borrowing plan included a combination of Eurobond and Sukuk offerings, valued at $1.7bn and $500m, respectively.

Edun said that the final allocation between the financial instruments would be determined based on market conditions and advice from transaction advisors, pending National Assembly approval.

The first (memo) was to complete the borrowing programme of the FG in terms of the external borrowing with the approval of the $2.2bn financing programme made up of access to the international capital market for some combination of the Euro bond offer and the Sukuk bond offer.

A Euro bond of about $1.7bn and Sukuk financing of another $500m the actual makeup of the financing which will be done as soon as the National Assembly has considered and seen fate to hopefully approve of the borrowing plan and the external borrowing approval is given, it will be done this year, as soon as possible after approval.

The actual combination of instruments that will be raised will depend on what the advisors, the transaction advisors, the commercial advisers, and what they say about market conditions at the time we decide and we want to enter the market,Edun explained.

In its report, the DMO noted that Nigeria’s external debt experienced a notable increase in its naira valuation between March 31, 2024, and June 30, 2024, due to naira devaluation.

On March 31, 2024, the total external debt was valued at $42.12bn, equivalent to N56.02tn, using an exchange rate of N1, 330.26/$1.

By June 30, 2024, the external debt rose marginally to $42.90bn but surged to N63.07tn in naira terms due to a higher exchange rate of N1, 470.19/$1.

This represents a 12.59 per cent increase in the naira valuation of external debts within the period, largely driven by the naira’s depreciation.

While the dollar-denominated debt grew by just 1.87 per cent, the significant devaluation amplified the burden of external debt in local currency terms, further emphasising the exchange rates critical role in Nigerias debt sustainability.

Justifying the borrowing, Edun said the external financing initiative aligned with the administrations broader economic recovery plan, which focused on stabilising macroeconomic conditions, adjusting market pricing for foreign exchange and petroleum products, and supporting local production.

He added that, earlier in the year, Nigerias successful domestic issuance of dollar bonds highlighted the growing resilience and sophistication of the countrys financial market, attracting both local and international investors who showcased confidence in the federal governments economic reform agenda.

It was earlier reported that the federal government spent $3.58bn servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.

This was according to data from the Central Bank of Nigeria on international payment statistics.

The significant rise in external debt service payments shows the mounting pressure on Nigerias fiscal balance amid ongoing economic challenges.

Culled from Daily Post Nigeria

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