Sustainability of the Debt Relief - Nigeria’s Case
Remarks at
The Slate is Clean: What’s Next?Conference on Debt Relief in Africa
By
Abraham NwankwoDirector-General, Debt Management Office
(Presidency)Abuja – Nigeria
Egmont Palace, 8bis Place du Petit Sabion, 1000 Brussels, Salle Arenberg
September 26, 2012
Outline
2
I. Debt ReliefII. Analytical & Policy InitiativesIII. Institutional Building InitiativesIV. Development of the Domestic Bond Market as Alternative
Viable Borrowing SourceV. Overall Economic PerformanceVI. Nigeria’s Debt Sustainability Situation
I. Debt Relief
3
Nigeria’s Paris Club (PC) debt at exit was US$30.85 billion in 2004; total external debt was US$35.94 billion
Nigeria was a non-HIPC
Despite four previous reschedulings, Nigeria was still unable to meet up with its PC debt obligations
Nigeria had no option but to approach the Paris Club creditors for debt write-off
In 2005, Nigeria obtained a 62% debt write-off of its PC debt amounting to US$18.75 billion
A total sum of US$12.09 billion was paid to the creditors to free Nigeria of its PC debt
Nigeria’s external debts was brought to a sustainable level of about US$3.54 billion in 2005, and still remains sustainable to date
II. Analytical & Policy Initiatives
4
Annual Debt Sustainability Analysis (DSA) commenced 2005
Incorporated State Governments’ domestic debt data and contingent liabilities in the annual DSA in 2010
First National Debt Management Framework (NDMF, 2008 – 2012) introduced 2008
National Medium Term Debt Management Strategy (MTDS, 2012 – 2015) introduced 2012
III. Institutional Building Initiatives
5
Public Debt Management more complex in a Federal System
Nigeria has one Central Government and 36 State Governments, which exercise a high degree of fiscal autonomy
Establishment of Debt Management Departments by the Debt Management Office in all the 36 States commenced in 2007
Involves: • Institutional and Capacity Building • Legal Framework• Coaching and Supervision• Domestic Debt Data Reconstruction
Exercise will be concluded by end-2012
IV. Development of the Domestic Bond Market as Alternative Borrowing Source
6
Tenor
Testing
Phase
Smootheni
ng Phase
Regular Monthly Issuance Phase
2003 2004200
5200
6200
7200
8200
9201
02011
2012*
2-YEAR - -√
- - - - - - -
3-YEAR√
-√ √ √ √ √ √ √
-
5-YEAR√
- -√ √ √ √ √ √ √
7-YEAR√
- -√ √
- - - -√
10-YEAR
√- - -
√ √ √ √ √ √
20-YEAR
- - - - -√ √ √
-
• Issuance, Subscription & Allotment• FGN Bond Market Transformation: Progression of Tenor Elongation
* As at end-August 2012
Instruments
2002 2009 2011
Amount % Amount % Amount %
NTBs 733.76 62.9 797.524.7
1,727.91
30.73
Promissory Notes
nil nil 63.01.95
nil nil
FGN Bonds nil nil 1,974.961.2
3,541.19
62.98
Treasury Bonds
430.61 36.9 392.012.1
353.73 6.29
Development Stocks
1.63 0.12 0.520.02
- -
Total 1,166.00 100 3,228.0 1005,622.8
3100
7
Holder
2002 2009 2011
Amount % Amount % Amount %
CBN 532.545.6
7323.18 10.01 348.84 6.21
Banks & Dis. Houses
460.239.4
71,274.58 39.49 3,790.90 67.42
Non-Bank Public
173.314.8
61,345.55 41.68 1,336.61 23.78
Sinking Fund nil nil 284.72 8.82 146.49 2.61
Total 1,166 100 3,228 100 5,622.83 100
•Dominance of long-termed debt instruments and holding structure skewed in favour of the private sector have helped to establish a debt market driven by market forces.
IV CONTD.
8
IV CONTD.
With effect from October 1, 2012, JP Morgan will include FGN Bonds in its Government Bond Index-Emerging Markets (GBI-EM)
This development is an independent external recognition that the transformation of the domestic bond market has been executed in a manner that has enhanced the quality and strength of the domestic financial markets.
9
• Nigeria’s economic performance has been remarkably stable
Average Real GDP Growth2003-2011E (%)
Angola 11.6
Mongolia 8.6
Nigeria 7.6
Kazakhstan 7.3
Peru 6.6
Zambia 6.1
Venezuela 4.5
Gabon 2.9
GDP Growth Volatility 2003-2011E
(standard deviation, in %)
Angola 8.4
Venezuela 8.1
Mongolia 5.2
Kazakhstan
3.3
Peru 2.8
Gabon 2.4
Nigeria 1.9
Zambia 0.8
Real GDP Growth RateReal GDP Growth Rate
V. Overall Economic Performance
VI. Nigeria’s Debt Sustainability Situation
10
Type
2004 2010 2011
Amount (US$
Billion)% of Total
Debt/GDP
Amount (US$ Billion)
% of TotalDebt/GDP
Amount (US$ Billion)
% of TotalDebt/GDP
External Debt: Federal & States
35.94 77.7 41.88 4.57 11.42 2.01 5.67 11.83 2.38
Federal Domestic Debt
10.31 22.3 12.02 30.51 76.10 13.39 35.88 74.92 15.07
States Domestic Debt
- - - 5.00 12.48 2.20 6.35 13.25 2.67
Total 46.25 100 53.90 40.10 100 17.20 47.89 100 20.12
• Public debt management has been strengthened by institutional reforms and appropriate legal and fiscal frameworks - Fiscal Responsibility Act 2007, Medium Term Expenditure Framework, fiscal consolidation, etc.
THANK YOU
