The DMO’s most recent quarterly publication on external debt service shows that the FGN’s external debt service payments amounted to USD598m in Q2 ‘22. A breakdown shows that the total comprised of USD457m and USD141m for market and non-market related debt service payments respectively. The amount is roughly USD299m higher than the FGN’s debt service obligations for Q2 ’21. The huge difference y/y is due to USD300m in principal payments on the Diaspora bond which the FGN redeemed in June of this year.

In comparison, the FGN’s domestic debt service obligation over the same period totalled c.USD1.6bn (NGN665bn), or almost three times (2.7x) the payments for external debt service.

As such, servicing foreign debt is still less expensive for the FGN compared with servicing domestic debt. A key reason for this is that almost 60% of total external debt is owed to multilateral lenders on concessional terms.

Based on interest and fee payments in the twelve months to Jun ’22 and the stock of debt as at end-Jun, we calculate the average borrowing cost from the World Bank Group at 1.3%, and the African Development Bank Group at 0.9%.

The FGN’s commercial debt obligations work out roughly at 7.2% over the same period.

In contrast, the FGN’s domestic borrowing costs averaged roughly 12.2% over the same period. The cost of the FGN’s new domestic borrowings will be significantly higher because of the sharp rise in bond yields this year.

According to data from the Budget Office of the Federation, external debt service payments amounted to just 29% (c.USD1.3bn) of total debt service cost in H1 ’22, with commercial debt service totalling c.66% of aggregate external debt service costs.

The 2023 budget proposal envisages that approximately NGN1.76trn of the NGN8.8trn in borrowings needed to partially cover the NGN10.8trn fiscal deficit will be sourced from external borrowings.