Nigeria’s external debt service payments increased to N392.13 billion or USD1.28 billion (at N306.35/USD) in September 2018 (from N117.08 billion or USD383.45 million – at N305.70/USD in September 2017). Hence, implicit interest rate rose to 5.93% in 9M 2018 (from 2.50% in 9M 2017). Also in a new development, CBN’s credit to private sector slumped to 0.24% in Q3’18, Naija247news has learned.
Recent figure from total debt released by the Debt Management Office (DMO) showed that Nigeria’s total public debt stock for the third quarter of 2018 increased marginally by 0.22% to N22.43 trillion in September 2018 (from N22.38 trillion in June 2018).
The increase in the country’s total debt stock was due to a 1.15% rise in the Federal Government of Nigeria’s (FGN) domestic debt stock to N12.29 trillion in September 2018 (from N12.15 trillion in June 2018) and states domestic debt stock which grew by 1.44% to N3.53 trillion in September 2018 (from N3.48 trillion in June 2018).
Further breakdown of the FGN’s total domestic debt stock revealed that the upward movement in FGN bonds defied the current administration’s debt strategy of subtituting local debt for external debt, although it still stuck to its debt strategy of reducing short term domestic stock; hence, a slight shift in the portfolio composition. Long term domestic debt to short term domestic debt stock stood at 77:23 in September 2018 from 76:24 in June 2018 as total amount of treasury bills fell to N2.81 trillion from N2.95 trillion; in line with its “60:40” long term debt to short term debt strategy.
However, the domestic debt component of the total debt stock rose to 70.51% in September 2018 (from 69.84% and 70.28% in June 2018 and March 2018 respectively). Meanwhile, domestic debt service payment rose y-o-y by 113.06% to N1.57 trillion in 9M 2018 (given the significant 241.41% q-o-q increase in FGN Bonds interest amount to N447.01 billion in Q3 2018) up from N1.24 trillion in 9M 2017.
Hence, implicit interest rate rose to 12.82% in 9M 2018 (from 9.92% in 9M 2017). On the external sector, external debt stock decreased slightly to N6.615 trillion or USD21.59 billion (at N306.35/USD) in September 2018 (from N6.750 trillion or USD22.08 billion – at N305.70/USD in June 2018) amid repayment of USD500 billion Euro Bonds in Q3 2018.
External debt service payments increased to N392.13 billion or USD1.28 billion (at N306.35/USD) in September 2018 (from N117.08 billion or USD383.45 million – at N305.70/USD in September 2017). Hence, implicit interest rate rose to 5.93% in 9M 2018 (from 2.50% in 9M 2017). In another development, the Central Bank of Nigeria’s (CBN) depository corporations survey showed 0.72% m-o-m decrease in Broad Money to N31.79 trillion in November 2018.
This resulted from a 3.41% m-o-m decline in Net Domestic Assets (NDA) to N13.26 trillion which offset a 1.17% m-o-m increase in Net Foreign Assets (NFA) to N18.99 trillion. On domestic asset creation, the decrease in NDA resulted from a faster decline of 3.09% in Net Domestic Credit (NDC) to N26.06 trillion which was accompanied by a slower 2.78% m-o-m fall in Other Liabilities (net) to N13.26 trillion
Further breakdown of the NDC showed a 20.66% m-o-m fall in Credit to the Government to N2.98 trillion as well as a decline of 0.24% in Credit to the Private sector to N23.08 trillion. On the liabilities side, 0.72% m-o-m fall in Broad Money Supply was driven by 4.92% m-o-m drop in Narrow Money to N10.69 trillion (as Demand Deposits which plunged by 6.88% to N8.98 trillion was partly offset by a 6.87% rise in currency outside banks to N1.71 trillion); also, Quasi Money (near maturing short term financial instruments) fell by 0.19% m-o-m to N14.77 trillion.
Reserve Money (Base Money) moderated m-o-m by 7.06% to N6.81 trillion as Bank reserves fell m-o-m by 13.15% to N4.37 trillion; however, currency in circulation rose to N2.10 trillion. We expect the increased ratio of the domestic debt to foreign debt to be reversed in Q4 2018, given the new external borrowing of USD2.86 Billion which was raised in the last quarter of 2018 and the 20.66% m-o-m fall in credit to the government in November 2018.
Amid the 0.24% decline in credit to private sector, we note that the strategy by CBN to use the banks’ cash reserves in its vault to fund the real sector has not been apparent.