DEBT MANAGEMENT OFFICE NIGERIA Pr Presenta esentation on Ni tion on Nigeria geria by Abraham . E. Nwankwo Director-General Debt Management Office, Nigeria
DEBT MANAGEMENT OFFICE NIGERIA I. Background of the Economy Structure of GDP (2015) * 2
DEBT MANAGEMENT OFFICE Background of the Economy cont’d NIGERIA Contribution of Oil & Gas To GDP: 14% To Export Earnings: ˃ 90% To Public Revenue: ˃ 80% To Employment: 0.01% ( 2013, NBS Q 4 , Survey ) Drastic Structural Collapse in Price of & Revenue from Oil From average of USD110 per barrel between 2010 and mid- 2014 to ˂ USD30 per barrel in Q 1 , 2016 Direct and indirect drop in public revenue: about USD20 billion per annum 3
Background of the Economy cont’d DEBT MANAGEMENT OFFICE NIGERIA Stabilization Measures: For Subnationals (States): Restructuring of their bank loans into 20-year bonds. Intensive and extensive tax collection − existing tax/GDP ratio of about 6% contrasts with peer group average of about 18%. Efficiency in Expenditure: cost-reduction, leakage blockage; use of computerized payroll and accounting systems to maximize inflows and minimize outflows 4
II. Debt Management DEBT MANAGEMENT OFFICE NIGERIA Total Public Debt (June 30, 2016): Amount: USD61.4 billion − External: 11.3 billion (18%) − Domestic: 50.1 billion (82%) Debt/GDP ratio: 12.25% 5
DEBT MANAGEMENT OFFICE Debt Management con’d NIGERIA NIGERIA: EXTERNAL DEBT RATIOS AFTER PARIS & LONDON CLUB DEBTS EXITS Year (a) (b) (c) (d) External Debt Stock External Debt External Debt External Debt as Percentage of Stock/GDP Stock/Export Service/Export Total Debt Stock Ratio Ratio Ratio (%) (%) (%) (%) 2006 20.43 4.28 15.79 20.05 2011 13.64 3.10 8.40 0.50 June, 2016 18.33 2.24 23.37 0.74 Applicable Limit 40.00* 40.00 150.00 20.00 *Established in Nigeria’s Debt Management Strategy, 2016-2019 6
DEBT MANAGEMENT OFFICE Debt Management con’d NIGERIA NIGERIA: EXTERNAL DEBT CATEGORIES AFTER PARIS & LONDON CLUB DEBTS EXIT Multilateral Bilateral Commercial Year % of Total % of Total % of Total 2006 73.59 9.20 17.21 2011 80.63 8.01 11.36 June, 2016 70.96 15.72 13.32 Average Interest Rate 0.75 2.50 5.75 Tenor Range 25 - 40 yrs 12 - 25 yrs 10 - 12 yrs Note: From the preceding 2 Tables, Nigeria's external debt is of investment grade 7
DEBT MANAGEMENT OFFICE Debt Management con’d NIGERIA NIGERIA: COMPOSITION OF PUBLIC DEBT AFTER PARIS & LONDON CLUB DEBTS EXITS External Debt Stock Domestic Debt Stock Total Public Debt Debt/GDP as Percentage of Total as Percentage of Total in USD (Million) Ratio Debt Stock Debt Stock Year 2006 20.43 79.57 17,349.69 14.18 2011 13.64 86.36 41,549.44 17.45 June, 2016 18.33 81.67 61,447.01 12.25 8
DEBT MANAGEMENT OFFICE Debt Management con’d NIGERIA 9
Debt Management con’d Nigeria’s Eurobond Jan. 2016 Sept. 2016 5.125% US$500M 7.304% 4.517% JUL 2018 6.75% US$500M 8.596% 6.454% JAN 2021 6.375% S$500M 8.680% 6.607% JUL 2023 10
Debt Management con’d DEBT MANAGEMENT OFFICE NIGERIA Change in Foreign Participation in the Domestic Bond Market virtually no impact on subscription − local investors guarantee oversubscription Addressing the Shocks a deep and reliable (though costly) domestic bond market plan: to refinance maturing domestic debts with long term external debts − to reduce debt service cost for the sovereign and reduce pressure in the domestic market to favour the private sector Average cost of debts substantially lower for external debt compared to domestic debt High domestic interest rates: Solution – medium to long term structural changes 11
DEBT MANAGEMENT OFFICE Debt Management con’d NIGERIA High Domestic Debt service to Revenue Ratio: Solution − exploit space contained in low tax/GDP ratio of ˂ 6% compared to peer group of 18% Even with commodity price and forex revenue crisis, the strategy is still to borrow substantially and strategically: to continue the existing pursuit of closing huge infrastructure deficit to help spend the economy out of recession for inclusive and sustainable growth: − infrastructure competitiveness diversified export earnings strengthening of reserves & exchange rate Elements of Nigeria’s Debt Management Strategy (2016 – 2019) Change: From External: Domestic = 19:81 To External: Domestic = 40:60 12
DEBT MANAGEMENT OFFICE NIGERIA THANK YOU 13
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