Presentation on Nigeria

by

Abraham . E. NwankwoDirector-General

Debt Management Office, Nigeria

DEBT MANAGEMENT OFFICENIGERIA

I. Background of the Economy

Structure of GDP (2015) *

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Background of the Economy cont’d

Contribution of Oil & Gas To GDP: 14% To Export Earnings: ˃ 90% To Public Revenue: ˃ 80% To Employment: 0.01% (2013, NBS Q4, 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 Q1, 2016 Direct and indirect drop in public revenue: about USD20 billion

per annum

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Background of the Economy cont’d

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

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II. Debt Management

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%

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Debt Management con’dDEBT MANAGEMENT OFFICENIGERIA

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(a) (b) (c) (d)

External Debt Stock

as Percentage of

Total Debt Stock

(%)

External Debt

Stock/GDP

Ratio

(%)

External Debt

Stock/Export

Ratio

(%)

External Debt

Service/Export

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

Year

NIGERIA: EXTERNAL DEBT RATIOS AFTER PARIS & LONDON CLUB DEBTS EXITS

*Established in Nigeria’s Debt Management Strategy, 2016-2019

Debt Management con’dDEBT MANAGEMENT OFFICE

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Multilateral Bilateral Commercial

% 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

Year

NIGERIA: EXTERNAL DEBT CATEGORIES AFTER PARIS & LONDON CLUB DEBTS EXIT

Debt Management con’dDEBT MANAGEMENT OFFICE

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NIGERIA: COMPOSITION OF PUBLIC DEBT AFTER PARIS & LONDON CLUB DEBTS EXITS

Year

External Debt Stock as Percentage of Total

Debt Stock

Domestic Debt Stock as Percentage of Total

Debt Stock

Total Public Debt in USD (Million)

Debt/GDP Ratio

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

Debt Management con’dDEBT MANAGEMENT OFFICENIGERIA

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Debt Management con’d

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Nigeria’s Eurobond Jan. 2016 Sept. 2016

5.125% US$500M

JUL 2018

7.304% 4.517%

6.75% US$500M

JAN 2021

8.596% 6.454%

6.375% S$500M

JUL 2023

8.680% 6.607%

Debt Management con’d

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 externaldebts − to reduce debt service cost for the sovereign and reducepressure in the domestic market to favour the private sector

Average cost of debts substantially lower for external debt comparedto domestic debt

High domestic interest rates: Solution – medium to long termstructural changes

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Debt Management con’d

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

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THANK YOU

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