According to Debt Management Office (DMO), Nigeria’s total public debt stock jumped year on year (y-o-y) by 15.64 percent to N33.11 trillion as at March 2021 (from N28.63 trillion as at March 2020). (from N28.63 trillion as at March 2020).
The y-o-y increase in the country’s total public debt stock was chiefly due to a 24.86 percent rise in external debt to N12.47 trillion (or USD32.86 billion at N379.50/USD) as at March 2021 from N9.99 trillion (or USD27.67 billion at N361.00/USD) in March 2020.
Nigeria received USD3.48 billion in loans from the International Monetary Fund in less than a year. In addition, an additional loan of USD1.43 billion was obtained from IDA. Furthermore, the Naira’s depreciation against the US dollar exacerbated external debt; y-o-y, the Naira depreciated by 5.10 percent against the USD to close at N379.50/USD in March 2021.
Nigeria paid a portion of its multilateral (USD81.05 million), bilateral (USD61.38 million), and commercial loans (USD500 million) totaling USD642 million in the quarter under review.
As a result, external debt service payments in Q1 2021 fell to N126.02 billion (or USD332.07 million) from N170.60 billion (or USD472.57 million) in Q1 2020. A further breakdown of the total external debt stock in Q1 2021 revealed that multilateral loans accounted for 54.26 percent (USD17.83 billion), with loans from the International Development Association (IDA) accounting for USD11.09 billion, loans from the IMF accounting for USD3.48 billion, and others accounting for USD3.26 billion.
In Q1 2021, bilateral loans accounted for 12.73 percent (USD4.18 billion), with loans from China (Exim Bank of China) totaling USD3.40 billion and loans from France totaling USD0.49 billion. Commercial loans accounted for 32.47 percent (USD10.66 billion), with Eurobonds accounting for USD10.37 billion and Diaspora bonds accounting for USD0.30 billion. In the first quarter of 2021, the local debt stock increased by 10.71 percent to N20.64 trillion (from N18.64 trillion in Q1 2020).
According to a breakdown of the domestic debt figure, FG’s domestic debt stock increased to N16.51 trillion in Q1 2021. (from N14.53 trillion in Q1 2020). Despite the significant increase in FG’s domestic loan, local debt service payments increased marginally by 0.59 percent to N612 billion in Q1 2021 from N609.13 billion in Q1 2020 due to relatively low interest rates.
Given the President’s request to the National Assembly to approve N2.34 trillion in new capital, we expect Nigeria’s local debt and annualized implicit interest rate (8.92 percent) to rise in 2021.
Furthermore, the recent rise in domestic interest rates will put additional upward pressure on debt service. Meanwhile, as Nigeria seeks additional loans from the IMF, it may be forced to rely more on market-driven exchange rate policy, which may have a knock-on effect on inflation.