Nigeria’s Consolidated Debt to GDP Ratio Close to 50% – S&P

The debt to gross domestic product (GDP) ratio for Africa’s largest economy is closer to 50% when consolidated to include Central Bank of Nigeria (CBN) advances to the Federal Government as well as outstanding Open Market Operations (OMO) bills.

This was disclosed yesterday at rating agency Standard and Poor’s webinar with the theme – Spotlight on Emerging Markets: Focus on Nigeria.

The debt management office (DMO) which excludes OMO and CBN advances puts Nigeria’s debt to GDP ratio as closer to 22 percent. The DMO calculates Nigeria’s total public debt to be N35.46 trillion as at June 2021.

The level of Ways and Means loans extended by the Central Bank of Nigeria (CBN) to the Federal Government (FG) stood at N16.1 trillion as at September 2021, according to data from investment firm Afrinvest.

The increasing reliance on CBN overdrafts has come with negative consequences, the International Monetary Fund said.

“The financing is costly for the federal government at interest rates of the monetary policy rate plus 300 basis points, and for the CBN, with sterilization done through issuance of open market operation bills,” the IMF said.

Finance Minister Zainab Ahmed and central bank Governor Godwin Emefiele last year agreed to end CBN overdrafts to the government by 2025 in a letter of intent to the IMF before the release of emergency financing.

However, Emefiele defended the practice, saying it would be irresponsible not to finance the government when revenues drop.

Standard and Poor’s has Nigeria’s rating at B- with a stable outlook.

Nigeria has been increasingly relying on CBN financing of its fiscal operations due to lower oil production and prices over the past 3 years.

Oil production is down from its heydays of over 2 million barrels per day to an average of 1.35 million barrels per day today.

This is largely due to technical difficulties as well as militancy and non-investments over the years, according to S&P.