The Federal Government has projected to spend 82% of its revenue on interest payments in 2023. The projections suggest an improvement in debt servicing to the revenue which grew to 96.3% in 2022 from 86.1% and 87.8% in 2020 and 2021 respectively. According to IMF, the country’s external debt (including the private sector) is expected to rise to $121.6bn which suggests a near-term downside risk of high debt-servicing costs with the country’s inability to benefit from the global high oil prices in 2022. Analysts believe the optimistic projection by FG was built on the expectation that revenue will grow with the estimated 1.69mbpd oil production for the 2023 budget and subsidy removal. However, analysts doubt the possibility of the 82% debt servicing to revenue in 2023 as domestic borrowing has increased from N225bn monthly bond issuance to N360bn and the securitization of ways and means will bring total debt to N77trn. The large debt rises interest payments while oil production which contributes 80% of revenue remains at 1.26mbpd.
Contrary to the bond offer of N360bn for the February FGN bond auction, the DMO sold N770.56bn as investors’ subscriptions remained strong at N992.11bn. Across the four tenors, only Apr 2032 had a low subscription of N78bn and an allotment of N51.12bn while others had above N200bn allotment. The rates in 2028, 2032, 2037, and 2049 maturities settled at 13.99%, 14.90%, 15.90%, and 16% respectively. The unmet bids should continue in the secondary market today (see table 2 below)
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