Ngozi Okonjo-Iweala: Nigeria’s debt profile going up

Nigeria’s foreign debt stands at $9.38 billion, up 40 percent in absolute terms from its last publicly available data of $6.7 billion at the end of March 2013, the Debt Management Office said on Tuesday.

The DMO said local debt was currently at 8.9 trillion naira($55 bln), up 37.1 percent from 6.49 trillion naira at end-March 2013. But the debt-to-GDP ratio is 12.51 percent of its rebased GDP, down from 21 percent at end-March 2013, the DMO said.

Nigeria rebased its economy in April, almost doubling its gross domestic product to more than $500 billion, making it Africa’s top economy.

“This is not an indication that Nigeria can borrow without caution … because our tax GDP ratio is very low,” DMO director general Abraham Nwankwo told reporters.

He said tax revenue as a percentage of GDP was just 6 percent.

Nigeria has said it wants to increase the amount it borrows overseas to around 40 percent of all debt over a three to five year period, to take advantage of ultra-loose monetary policy in the West to lower its funding costs.

Foreign borrowing stood at 12 percent of total debt in 2013.

Africa’s biggest economy is growing as an investment destination as economic growth remains high and its currency stabilises. But investors are wary of a long-established tendency to mismanage oil revenues, mostly because of massive corruption particularly as national elections loom next year.

Nigeria raised $1 billion in a Eurobond issue last year to increase its total foreign debt. But analysts say the build-up in domestic debt is a concern.

“The rebasing made the debt ratios look better, but that is still a sharp nominal increase in Nigeria’s debt,” Razia Khan, head of Africa research at Standard Chartered Bank said.

“In more upbeat circumstances – higher oil prices, investors would focus on the benign public debt ratios. With oil below $100 per barrel, the focus is more likely to shift to the rapid build-up in debt,” Khan said.

Reuters