The Nigeria’s federal government redeemed N638.897 billion worth of matured Treasury Bills between January and June 2018 as it continues to implement a debt strategy which targets to reduce borrowing costs and encourage more of long term, external borrowing against taking the costlier, short-term domestic money.
This brings the total TBs redeemed so far to N839.929 billion, since last December when government retired N198 billion maturing bills.
Patience Oniha, Director General of the Debt Management Office confirmed on Tuesday that the bills were redeemed from the proceeds of the $2.5 billion Eurobond issued in February.
Addressing the press in Abuja, Oniha said the debt pay off has helped cut down the ratio of domestic to external debt to 69.83:30.17 as at June 2018, an improvement on the 73.36:26.64 recorded as at December 2017.
The government got an approval from the National Assembly to issue a $3billon Eurobond last year specifically to retire maturing obligations. Out of that, $500million was raised in November to retire all maturing TBs while the remaining $2.5 billion was issued in February.
According to DMO figures, FGN domestic debt stock has consistently decreased from N12.589 trillion in December 2017 to N12.577 trillion in March 2018 and N12.151trillion in June 2018.
“The Eurobond proceeds was specifically dedicated to retire maturing obligations, what we did was to use it to retire treasure bills not FGN bonds because they are the short term one.
“That explained why our long term to short term in the portfolio has increased significantly,” Oniha explained.
According to her, “the implications for government is that the portfolio is now more long term than short term, so the risk of refinancing and the mismatch between what we use the money for and tenor of the money is reducing gradually.
“Going forward, that remains the strategy which is to increase the long term component, that is also what we are trying to achieve by borrowing externally.”
Meanwhile, total Public Debt which comprises the Domestic and External Debt Stock of the Federal and 36 State Governments and the Federal Capital Territory stood at N22.38trn or $73.21bn as at June 30, 2018.
The figure indicated a marginal increase of 3.01 percent over the December 2017 debt levels and according to the DMO, the increase over the 6 months period was due largely to the $2.5 Billion Eurobond issued in February 2018 to redeem domestic obligations.
“When compared to the Debt Data for March 2018, the Public Debt Stock actually decreased by 1.44 percent from N22.707trn in March 2018 to N22.38trn in June 2018,” the debt office stated.
“The decrease was due to a 3.38% decline in the FGN’s Domestic Debt Stock between March and June 2018. There were however marginal increases of 0.07% in the External Debt Stock and 2.75% in the Domestic Debt of States,” it further explained.
In her presentation at the press event, the DMO DG explained that “a major highlight in the Public Debt Data was the consistent decrease in the FGN’s Domestic Debt which declined from N12.589 trillion in December 2017 to N12.577 Trillion in March 2017 and N12.151 Trillion in June 2018.
“This reduction in the FGN’s Domestic Debt Stock arose from the redemption of N198 Billion Nigerian Treasury Bills in December 2017 and another N639 Billion between January and June 2018.”
She also explained that the implementation of the Public Debt Management Strategy whose overall objective is to ensure that Nigeria’s debt is sustainable, is already yielding positive results.
“One of the beneficial outcomes is the rebalancing of the Debt Stock; the Ratio of Domestic Debt to External Debt inching towards the target of 60:40 and the target of 75:25 between Long Term Domestic Debt and Short Term Domestic Debt. According to the figures for June 30, 2018 released by the DMO, the ratio between Domestic and External Debt stood at 70:30 compared to 73:27 in December 2017.
The ratio between Long Term Domestic Debt to Short Term Domestic Debt was also 76:24 in June 2018 compared to 72:28 in December 2017.
Oniha explained that the new debt strategy has seen lower interest rates for the benchmark FGN Securities from about 18.5 percent in January 2017 to 11-14% in the first half of 2018.
“Also, with the redemption of about N840 Billion of Nigerian Treasury Bills more funds were available for lending by banks to the Private Sector. External capital raising activities also contributed to the increase in external reserves,” she further explained.
Onyinye Nwachukwu, Abuja
