NIGERIA: FG Drops Borrowing Rate As Public Debts Hit N24.38tn

Director General of DOM; Patience Oniha. Photo Credit: New Mail Nigeria
Director General of DOM; Patience Oniha. Photo Credit: New Mail Nigeria

The Debt Management Office (DMO) revealed that Nigeria’s aggregate public debt has experienced an increase of 12.25 per cent or N2.66 trillion year-on-year as at December 31, 2018, totalling N24.387 trillion ($79.437 billion), compared to N21.7 trillion posted over the same period in 2017.

Speaking in Abuja at the second edition of the Sigma Pensions Business Roundtable, themed: “Navigating the Frontiers of Ethical Investing”, DMO’s Director General, Ms Patience Oniha, said the debt figure is a combination of those owed by Federal, States and Federal Capital Territory Administrations.

According to extrapolations given by her, external debt stood at N7.759.23 trillion ($22bn), while domestic component stood at N16.627.84 trillion ($56bn).

She pointed out that the share of domestic debt dropped to 68.18 per cent from 73.36 per cent as at December 31, 2017, thereby achieving a mix of 68.18 per cent and 31.82 per cent in the debt stock.

Speaking of the total debt stock, the Director-General said loans taken by the Federal Government takes a total of 78 per cent of the extrapolated figure, while States and the FCT accounted for 22 per cent. She pointed out that the Federal Government currently owes an external debt stock of N6.4 trillion while the domestic component stood at N17.11 trillion.

Further extrapolations by Ms Oniha sums the Federal Government’s debt profile to N19.23 trillion, while the States and the FCT have an external debt of N1.25 trillion and N3.85 trillion domestic debt, making a total of N5.15 trillion.

According to her, although the Federal Government’s domestic debt stock totals N331.12 billion Promissory Notes issued to oil marketing companies as well as State Governments in December 2018, the government’s debt strategy of exploring external funds was achieving the projected objectives such as to free more space for other borrowers in the domestic market.

She stated that “Other objectives are to extend the average tenor of the debt stock in order to reduce refinancing risk and increase external reserves,”.

She further added that “The implementation of the strategy led to an injection of N855 billion through the redemption of Nigerian Treasury Bills in 2018 and a general drop in the FGN’s borrowing rate in the domestic market from over 18 per cent p.a. in 2017 to 14 – 15 per cent p.a. in 2018,”.

Ms Oniha pointed out that, the DMO as part of its major plans as outlined for 2019 will undertake more of project-tied borrowing and benefit from more external borrowing from concessional sources, she also emphasized that the DMO announced plans to issue a 30-year Federal Government of Nigeria Bonds (FGN Bonds) for the first time.

According to her “The issuance of the Bond will meet the needs of annuity funds and other long term investors while also developing the domestic capital market and reducing the re-financing risk of the FGN. Another area of focus will be the management of Risks associated with the Debt Stock to mitigate debt service costs,”.

The Director-General added that this is captured in the 2019 budget proposal before the National Assembly.

Explaining how the Federal Government intends to cover for deficits as captured in the budget, she said “On the deficit of N1.649 trillion in the 2019 budget, the Federal Government would borrow N824 billion of the amount borrowed domestically through Federal Government Bonds, Sukuk, Green Bonds and Savings Bonds. The other N824 billion is expected to be financed externally from concessional sources as they are cheaper and are longer-termed funds for infrastructure,”.

Ms Oniha at the briefing told stated that the planned N15 billion Green Bonds and the infrastructure bonds would be issued in the second quarter of 2019.

The Director-General of DMO added President Muhammadu Buhari led administration is committed to promoting investments in Sukuk and other green bonds to promote financial inclusion as well as alleviate extreme poverty in the country.

Ms Oniha added that “The experience from the issuance of Sukuk bonds has been beneficial to the government. The Sukuk is one of the landmark achievement not only in terms of the fund but the projects being implemented”.

Assuring stakeholders of the government’s plan to do more with Sukuk, Ms Oniha stated that “We will like to do more with Sukuk because it’s transparent but the major issue for us now is to increase the investor base for ethical products,”.

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