Public Debt May Rise To N90.5trn – Analysts
Analysts have predicted that public debt outstanding would likely close at N90.49 trillion (or 43.1 per cent of GDP) in 2023 against N46.25 trillion or 23.2 per cent of GDP recorded in the corresponding period in 2022.
Specifically, analysts at Cordros Research Securities said as the CBN’s ways and means advances have been securitised in addition to the local currency depreciation, coupled with the expected increase in new borrowings to fund the 2023 budget deficit, it is expected that the public debt outstanding would settle at N90.49 trillion (or 43.1 per cent of GDP) in 2023, up from N46.25 trillion or 23.2 per cent of GDP witnessed in 2022.
The recently released data by the Debt Management Office (DMO) indicated that Nigeria’s public debt profile rose to N87.38 trillion in the second quarter (Q2), 2023 against N49.85 trillion posted in the first quarter (Q1), 2022.
The firm noted that the significant increase in debt during the review period was mainly due to the inclusion of the securitised ‘ways and means advances (N22.71 trillion) in the local debt numbers and foreign exchange (forex) devaluation on the foreign debt.
“The increase in public debt without contracting new ones played out just as we envisaged in our H2, 2023 domestic macroeconomic outlook. In addition, we highlighted that new borrowings by FGN and States also contributed to the increased debt.
“We are unsurprised that external debt outstanding rose by 69.3 per cent quarter on quarter to N33.25 trillion while domestic debt settled higher at N54.13 trillion (Q1-23: NGN30.21 trillion).
On crude oil production, the analysts said Nigeria’s crude oil production (including condensates) continued in an uptrend, increasing by 8.5 per cent m/m to 1.41mb/d in August (July: 1.30mb/d).
According to them, the increase was propelled by higher volumes from the Forcados terminal (+35.5.per cent m/m) as crude oil production activities resumed at the facility following the leak-induced shutdown in mid-July.
It stated that while progress is still underway as regards the fight against crude oil theft and vandalism, frequent leaks from pipelines and intermittent oil terminal shutdowns for repairs pose downside risks to crude oil production in the near term.
“Thus, we lower our 2023 average crude oil production estimate to 1.42mb/d (previously: 1.53mb/d | FGN’s estimate: 1.69mb/d), a relatively slight improvement compared to 2022 full-year production volume (1.37mb/d). Consequently, we expect the government’s oil revenue performance to remain underwhelming over the short term.”
Additionally, the analysts said Nigeria’s external reserve closed flat at $33.28 billion as of September 21, while the naira appreciated by 1.2 per cent to N747.76/USD at the I&E window (IEW), with total turnover at the window (as of 21 September) advancing by 52.3 per cent WTD to $418.61 million, as trades were consummated within the N475.00 – N910.00/USD band.
Cordros Research also noted that the narratives in the forex market have remained the same in recent weeks, as forex reform momentum has slowed down.
Therefore, they submitted that forex liquidity constraints would linger in the near term, barring any significant positive developments within the space.
“Hence, barring any significant positive developments, we expect the lingering low crude oil production and a sustained dip in foreign investors’ net flows to weigh on forex supply in the short term.
“Consequently, we expect forex liquidity constraints to linger in the near term, ensuring the local currency pressures remain intact.”
