Lenders shun Nigeria for its -B rating and N42.84tr debt amassed
By Jeph Ajobaju, Chief Copy Editor
International lenders are joining Japan to refuse to loan Nigeria more money as it has already grown its debt to N42.84 trillion with fears of repayment default amid low revenue as vast loan sums are stolen instead of being invested in the economy.
Abuja exceeded its borrowing target by N1.26 trillion in the first eight months of the year to August (8M 2022), increasing both domestic and foreign loans which had totalled N42.84 trillion in the second quarter (Q2 2022).
The Debt Management Office (DMO) disclosed it is now difficult for Nigeria to borrow from the international markets as global lenders and investors are shunning countries with Category -B economic rating.
DMO Director General Patience Oniha said Nigeria must gear up its revenue drive while looking for alternative sources of funds internationally.
“We really can’t survive like this,” she warned.
Oniha gave the warning when she appeared before the House of Representatives Aids, Loans and Debt Management Committee to defend the DMO’s 2023 budget.
She said the government has not been able to meet its external borrowing target, and is now looking for lenders in the United States and Europe.
Her words: “Where there is an issue is the new external borrowings. What was provided for in the 2022 budget is N2.57 trillion of new external borrowings and this, in naira terms at the budget exchange rate, is $26 billion.
“The reality is that if it were before, by now we would have issued Eurobonds to raise the money and we would be in good business.
“But let us say from the fourth quarter of last year, the international capital markets have not been opened to countries like Nigeria. So, in 2021, there was about $6 billion to raise. We raised $4 billion for that one. But this year, it is $1.25 billion.”
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International creditors not keen on Nigeria
“The international markets are not looking for countries with our ratings -B ratings,” Oniha said, according to reporting by The PUNCH.
“The invasion of Ukraine by Russia, as you know, turned around things in the world significantly. So, inflation rates are high, interest rates are high and investors are saying there are a lot of uncertainties as to what will happen.
“There is a threat of recession.
“So, what they have decided to do is to put their money in the G7 securities: United States, Germany, France, Japan, and so on. Those countries also issue bonds. So, that is where the investors are putting their money and rates have gone up significantly.”
Watching out for deficit percentage in budgets
Two global economic analysts and ratings agencies, Moody’s and Fitch, recently downgraded Nigeria to Category ‘B’ economy.
Oniha said Abuja must pay attention to the percentage of deficit in budgets.
“We really need to look at revenues. For debt to be sustainable medium term, you must earn revenues.
“We should not have a budget of N17 trillion and N10 trillion of deficit, and out of that [there is] new borrowing of N8.8 trillion, which is 50 per cent of your budget.”
