…As FG, states grow external debt by 114% under Buhari***
The Nigerian National Petroleum Corporation announced on Monday that it had commenced a technical framing workshop and subsequent project signing ceremony of the seven critical gas development projects to deliver about 3.4 billion standard cubic feet of gas per day to bridge the medium-term supply gap by 2020.
It said the 7CGDP was an integral leg of the gas development strategy designed to leverage the full potential of gas to meet the target of generating at least 15,000 megawatts of electricity by 2020.
The Group Managing Director, NNPC, Dr Maikanti Baru, said the projects would also close the demand-supply gap in the domestic gas market.
He stated that the corporation had engaged DeltaAfrik/Worley Parson and Crestech/Penspen to work with the Nigerian Petroleum Development Company and NNPC joint venture partners and other stakeholders to achieve the set project deliverables.
Baru said the corporation was working closely with other agencies like the Department of Petroleum Resources and the Nigerian Content Development and Monitoring Board to ensure timely approvals for the project and ensure that lease renewals requests related to the projects were supported for renewal by relevant agencies.
The Managing Director, Shell Petroleum Development Company, Mr Osagie Okunbor, whose firm is handling three out of the seven projects, pledged the commitment of the company to the successful execution of the 7CGDP, noting that Shell was fully aligned with Nigeria’s gas strategy and aspirations.
The 7CGDP include the development of the 4.3 trillion cubic feet Assa North/Ohaji South field; the development of the 6.4 TCF unitised gas fields (Samabri-Biseni, Akri-Oguta, Ubie-Oshi and Afuo-Ogbainbri); and the development of the seven TCF NPDC’s Oil Mining Leases 26, 30 and 42.
Others are the development of 2.2 TCF SPDC JV gas supply to Brass Fertiliser Company; the cluster development of five TCF OML 13 to support the expansion of Seven Energy Uquo Gas Plant; and the cluster development of 10 TCF Okpokunou/Tuomo West (OMLs 35 and 62).
In the meantime, the Federal Government and the 36 states of the federation as well as the Federal Capital Territory grew the country’s external loan commitments from $10.32bn in June 2015 to $22.07bn in March 2018, investigation has shown.
This reflects an increase of $11.76bn or 113.94 per cent growth in the country’s external debt within 33 months. The period is within the presidency of Muhammadu Buhari, as he took over the reins of government on May 29, 2015.
In naira terms, statistics obtained from the Debt Management Office in Abuja on Monday showed that the country’s external loans rose from N2.03tn as of June 31, 2015 to N6.75tn as of March 31, 2018. This reflects an increase of 232.51 per cent.
The difference, when the external debt is denominated in naira, reflects the beating that the local currency has taken since 2014 following the dwindling of the nation’s capacity to accumulate foreign currencies as a result of the steep fall in the price of crude oil, the main foreign exchange earner for the country.
The domestic debt of the country rose from N10.09tn as of June 2015 to N15.96tn as of March 2018. This reflects an increase of N5.87tn or 58.23 per cent within the period of analysis.
Taken together, the country’s public debt rose from N12.12tn as of June 31, 2015 to N22.71tn as of March 31, 2018. This reflects a difference of N10.59tn or a percentage increase of 87.37 per cent within a period of 33 months.
Broken down, the Federal Government component of the domestic loans stood at N12.58tn, while the states’ component stood at N3.38tn as of March 2018.
The increasing percentage of the external loans is a reflection of the country’s current debt management strategy, which targets to raise the debt ratio to 40 per cent external and 60 per cent local.
As of June 2015, the ratio stood at 16.77 per cent for external and 83.23 per cent for domestic. As of March 2018, it stood at 27.71 per cent external and 72.29 per cent domestic. Currently, there are ongoing foreign loans deals and negotiations that can bring the nation nearer to the 40 per cent target.
The country’s Debt Management Strategy 2016–2019 made a case for an increase in external financing with a view to rebalancing the public debt portfolio in favour of long-term external financing in order to reduce the debt service cost and lengthen the maturity profile.
In the document, the DMO stated, “To achieve a significant reduction in cost would require that the government accesses relatively cheaper long-term external financing in such a way that it first maximises the available funds from the concessional and semi-concessional sources, taking into account what may be readily available within a given period, after which other external sources would be accessed.
“Further lengthening of the maturity profile of the domestic debt portfolio through reduction in the issuance of new short-dated debt instruments or refinancing of maturing NTBs with external financing or both.
“Although the impact on cost of the introduction of new debt instruments into the domestic debt market is expected to be relatively small, the impact on maturity profile of total domestic debt could be significant; hence, reducing the risk of bunching, roll-over risk, and the associated debt servicing costs.”
The Federal Government had in 2017 borrowed from the international capital market to refinance $3bn maturing domestic debts as part of its overall debt management strategy of reducing debt service costs.