Has Nigeria not borrowed internationally since 2013? Minister misses mark

In a notable move, Nigeria’s finance minister Kemi Adeosun took to Facebook Live for the first time in April, where she painted broad strokes of the country’s economy.

Outlining the government’s borrowing plans, Adeosun said the country did not have enough of its own money for the level of infrastructure spending it wanted, which she put at 30% of its budget.

“To do that, as you know, we’ve been out in the market, we’ve done the Eurobond, we’ve done 2 now at US$1.5 billion and that’s been very exciting for us because Nigeria hasn’t borrowed internationally since 2013,” she said.

It is estimated that Nigeria needs about N10.63 trillion (US$33.6 billion at current rates) to build roads, bridges, power utilities, hospitals and schools.

“We do need to go outside and borrow. But we need to borrow as cheaply as possible. So we’ve approached the World Bank, China Exim [Bank] and some of the concessional lenders who lend [at] as low as 1.5%, and then we’ll blend that with the money we took from the Eurobond market which is now 7.5%,” Adeosun explained further.

Concessionary loans are those with cheaper and longer repayment terms while Eurobonds refer to debt denominated in a currency other than that of the country issuing it.

Given the country’s documented financial headaches after the steep fall in the price of its main export oil, is it accurate that Nigeria hasn’t been in foreign debt markets since 2013?

What is Nigeria’s external debt profile?

A country can either borrow internally or from international lenders. Once contracted, the latter is known as “external sovereign debt”.

Data from Nigeria’s debt management office shows that at the end of 2013, Nigeria owed US$8.82 billion on international loans.

At the end of 2015 this rose to US$10.7 billion, while in January 2017 it was at US$11.4 billion – an increase of 29.3% over 3 years. (Note: The figures do not include  arrears on the principal or interest paid on previous loans.)

In March 2014, multilateral lenders such as the World Bank and International Monetary Fund held 71% (US$6.51 billion) of Nigeria’s external debt. In December 2016 this had risen to US$7.99 billion.

In 2014, Nigeria was among the major recipients of US$10.6 billion in World Bank loans, receiving more than $2 billion, double the previous year. This money funded both budget shortfalls and infrastructure. Bilateral debts – those between 2 countries or their lending institutions – increased by 87.1% from US$1.03 billion in 2013 to US$1.92 billion in 2016. Lenders to Nigeria included France, Germany, Japan and China.

In late 2014 and early 2015 for example state-funded Chinese deals for Nigerian projects were announced, running into the billions of dollars.
Minister was referring to Eurobond only

When Africa Check asked Adeosun about the rising external debt profile in the period 2013, the minister said that she was “referring to the Eurobond issuance in the International Debt Capital Markets where we last issued in 2013”.

Other concessional loans such as from the World Bank had continued, she said.

Official data on the country’s Eurobond sales showed that Nigeria first tapped the Eurobond market in January 2011, raising US$500 million.

Its second offer was in 2013, when it took in US$1 billion in 2 tranches of $500 million.

In February 2017, Nigeria issued another Eurobond for $1 billion which started trading in March 2017. This was followed on 29 March by another $500 million issue.

Conclusion: Nigeria has borrowed internationally since 2013

In a social media broadcast to Nigerians, finance minister Kemi Adeosun said that to build infrastructure that would grow the economy, Nigeria needed to borrow money internationally.

Outlining why this was an attractive option, she said that the country had not borrowed internationally since 2013.

Africa Check looked at the data and found a steady rise in external debt between 2014 and 2016.

In response, the minister said that she was referring only to the issuance of foreign currency-denominated debt known as a Eurobond.

Data shows that the country’s external debt profile rose between 2014 and 2016.

Nigeria also issued 2 Eurobonds in the weeks before the minister made the claim. We therefore find her statement incorrect.

The need to borrow to finance projects that will lift the economy is a staple of almost every country, but the right information will strengthen the public debate around national debt.