Fitch, a world renowned rating agency currently increased the rating of Nigeria’s bonds (debt) from “negative” to “stable” meaning Nigerian bonds are safer to buy. This is good news considering the Euro debt crisis, though recently “contained”( but likely to rear its ugly head again) has threatened to throw the world into another recession.
Nigerian 10 year Euro Bond for $500m this week saw its yield drop to 45bp to 6.37%. With countries like Italy, Portugal and Spain considered highly indebted and with yields of close to 6% as well, one wonders why Nigeria can’t borrow more to develop the country. These countries have a debt to GDP ratio of over 100% compared to Nigeria’s 20.5% there is a lot more room to borrow. The world bank recommends a debt to GDP ratio of about 40%. Nigeria’s total external debt stock as at June 2011 was $5,398,040,000 ($5.4b) whilst local debt stock was N5,210,437,263,000 (N5.2tr) or $33.6b. Thus giving us a total of about $39b. Nigeria’s GDP as at 2010 was about N29.4tr or $190b. The good thing is that 86% of the debt are mostly local debts.
There is obviously the fear of racking up unsustainable debts, however, if invested properly Nigerians will live to enjoy a rare glimpse at First World Development in their life time. The problem really has been corruption. With the kind of public officials we have, there is also a valid fear that the money will be wasted in white elephant projects. Bearing all this, I believe there may never be a better chance to borrow.