Pr Presenta esentation on Ni tion on Nigeria geria by Abraham . - - PowerPoint PPT Presentation

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) *

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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’d

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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’d

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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’d

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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’d

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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

• versubscription

 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

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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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