Nigeria’s debt profile could rise if the Federal Government’s plan to embark on another round of external borrowing of $6.90 billion to support public finance in periods of lower Federal Account Committee Allocation (FAAC) disbursements materialises.
This was the view of experts who spoke to Daily Sun following a recent report showcasing Nigeria’s total debt stock which rose by another 4.5 per cent quarter-on-quarter ( q/q) to N27.40 trillion.
According to analysts at Cordros Capital, the increase stemmed from both the domestic (+2.4 per cent q/q) and external (+9.1 per cent q/q) debt portions.
Furthermore, the report stated that in terms of debt composition, domestic to foreign debt ratio stood at 68:32, above the 60:40 ratio targeted by the Debt Management Office (DMO).
Meanwhile, compared to the prior quarter, external debt service moderated significantly by 47.2 per cent q/q, supported by multilateral (-63.1 per cent q/q), bilateral (-70.4 per cent q/q), and commercial (-40.3 per cent) debt services. Similarly, domestic debt service moderated by 58.1% q/q, driven by bonds (-67.0 per cent q/q) and NTBs (-22.4 per cent q/q).
Against the COVID-19 induced collapse in crude oil prices, Nigeria’s monthly FAAC disbursements to the Federal Government and its federating units have consistently declined since January 20. Precisely, the total FAAC disbursement fell by N64.40 billion to N582.00 billion in March (February disbursements).
They further noted that compared to the monthly FAAC projections at the start of the year (N888.5 billion), the amount shared was 40.2 per cent lower while adding that with N400 billion projected for the next few months, they foresee another round of FG and/or Central Bank of Nigeria (CBN) bailouts to states to lessen the burden of fiscal shortfalls.
“Already, the FG has approved the withdrawal of $150 million from the Sovereign Wealth Fund to support the June FAAC disbursement. Beyond that, the CBN is now mandated to give interest payment moratorium for government-funded loans to the states, to further enable the states to meet recurrent expenditures. But with the government’s planning to borrow about $6.90 billion to support its public finance spending in periods of lower FAAC disbursements, the national debt stock may escalate further if the plan materialises”, They said.