The Federal Government has raised about N658 billion in new borrowings to augment national revenue and finance budget deficit.
At the first bond auction for the third quarter, the government issued N657.84 billion bonds across medium to long-term tenors at the domestic capital market.
Official allotment report by the Debt Management Office (DMO), which oversees government’s debt issuance and management, indicated that government overshot its initial target of N360 billion to raise N657.84 billion, riding on the back of a 163 per cent oversubscription.
The bonds on offer, which were reopening of previous issuances, included the 10-year, 14.55 per cent April 2029 bond; the 10-year, 14.70 per cent June 2033 bond; the 15-year, 15.45 per cent June 2038 bond and the 30-year, 15.70 per cent, June 2053 bond.
The report showed that government allotted N52.62 billion for the 10-year FGN April 2029; N39.86 billion for the 10-year FGN June 2033 bond; N146.49 billion for the 15-year FGN June 2038 bond and N417.77 billion for the 30-year FGN June 2053 bond.
The bonds were allotted at marginal rates of 12.50 per cent, 13.60 per cent, 14.10 per cent and 14.30 per cent respectively. The bid-to-cover ratios for the bonds were 1.14 times, 0.57 times, 2.12 times and 6.67 times respectively.
The report also showed that the DMO allotted N1.10 billion bonds through non-competitive bids across the 10-year FGN April 2029.
Nigeria’s total public debt had risen to N49.95 trillion, about $108.30 billion, in first quarter 2023. The increase was mainly due to continuing domestic borrowings by the federal government.
The DMO reported that the country’s public debt added another N3 trillion between December 2022 and March 2023.
In its quarterly assessment of the country’s debt profile, the DMO stated that the new figure of N49.95 trillion did not include the N22.719 trillion Ways and Means facility from the Central Bank of Nigeria (CBN).
In December 2022, total external borrowing was N18.702 trillion but by March 2023, it had grown to N19.643 trillion. The external debt was partly affected by currency depreciation. Total domestic debt stock also grew from N27.548 trillion in December 2022 to N30.209 in March 2023.
By the time the securitised Ways and Means of N22.719 trillion is captured in the June this year’s figures, Nigeria’s total public debt may hit the N70 trillion mark. The Ways and Means was securitized in May 2023.
The Nation had reported that borrowings in first quarter 2023 represented a double of government’s borrowings in fourth quarter 2022 and remained the largest debt issuances over the past 10 quarters tracked by The Nation’s Economic Intelligence Team.
The data indicated a consecutive monthly increase in borrowings in first quarter 2023 with government raising its initial offer sizes in most instances to mop up oversubscriptions to its offers.
While the DMO did not provide a breakdown of the debt increase, The Nation, in a month-on-month breakdown, had reported that government raised a total of N940.62 billion in January 2023. It increased borrowings to N1.035 trillion in February 2023 and closed the quarter with total borrowings of N1.196 trillion in March 2023.
With sovereign downgrades by global rating agencies and attendant higher risk profile as well as cost of international debt issuances, the government had been constrained to the domestic capital market to fund its running budget deficit. The government plans to raise N8.8 trillion through regular debt issuances to fund the N10.78 trillion budget deficit in 2023.
In January 2023, government raised N662.617 billion through its regular bond auction, N277.468 billion through the Nigerian Treasury Bills (NTBs) and N533.03 million through the Federal Government of Nigeria Savings Bonds (FGNSBs), a retail monthly debt issuance introduced in 2017.
In February 2023, the government raised N770.56 billion through bond auction, N263.50 billion through NTBs and N1.271 billion through the FGNSBs.
The government issued regular bonds worth N563.36 billion, NTBs valued at N631.84 billion and FGNSBs worth N1.01 billion in March 2023.
The DMO recently released its Market Access Country-Debt Sustainability Analysis (MAC-DSA) for 2022. This analysis is prescribed by the World Bank and the International Monetary Fund (IMF) to promote transparency.
The MAC-DSA is carried out every year by the DMO in conjunction with other agencies such as Central Bank of Nigeria (CBN), Federal Ministry of Finance, Budget Office of the Federation, National Bureau of Statistics (NBS) and the Office of the Accountant General of the Federation (OAGF).
Director General, Debt Management Office (DMO), Ms. Patience Oniha said the recent MAC-DSA report “highlighted the need for more revenues to keep the public debt sustainable”.
Oniha commended the recent policies of the President Bola Tinubu administration especially the removal of subsidy and the appointment of a Special Adviser on Revenue Mobilization which she described as “positive steps for public debt sustainability”.
Nigeria had increasingly relied on borrowings to bridge its dwindling national revenue.
Data provided by the Budget Office of the Federation showed that Nigeria has consistently over the past eight years significantly underperformed its revenue target. For instance, while the country had budgeted a revenue target of N7.2 trillion in 2018, it generated only N3.9 trillion, about 54 per cent of revenue target.
In 2019, it achieved about 59 per cent with revenue budget of N7 trillion and actual of N4.12 trillion. Revenue target and actual stood at N5.4 trillion and N3.96 trillion and N6.64 trillion and N4.64 trillion in 2020 and 2021 respectively. In the current budget, while the country had set a revenue target of N5.82 billion, it only achieved 63 per cent or N3.66 trillion by July 2022.
Nigeria has been using more than three-quarters of its revenues to service debts. Debt-service to total revenue ratio stood at 61.3 per cent in 2020, rose to 90.9 per cent in 2021 and currently stands at 84.5 per cent. Debt-service-to-total revenue was about 32.7 per cent in 2015.
DMO had expressed concerns that the country now faces the risk of being unable to sustain its rising national public debts unless urgent actions are taken to curtail expenditure and increase the country’s revenues.
DMO warned that while Nigeria’s loans may still be within acceptable range of the country’s economic size, the country’s ability to sustainably meet the obligations on such loans is now under threat.
According to the agency, said beyond keeping within debt-to-GDP ratio, it is important that the public debt is sustainable and government is able to service its debt without the risk of distress.