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Patience Oniha, Director General of the Debt Management Office (DMO), on Wednesday signaled the possibility of raising more debt instruments even as concerns heighten on rising debt stock which reached N21.725 trillion by end 2017.
Debt to GDP settled at 18.20 percent, though slightly lower than the government’s conservative threshold of 19.39 per cent as captured in a report released by the DMO in 2017 on Borrowing Limit.
In the report, the debt office had set the maximum amount that could be borrowed (domestic and external) by the Federal Government in 2017 without violating the country-specific threshold at $22.08bn as against the country’s international peer group threshold of 56 percent to measure its debt sustainability.
Speaking on the DMO’s debt management strategy, Oniha insisted that the country’s debt levels is still within sustainable range and that government must borrow to finance the budget deficits, specific projects and refinance maturing debt obligations.
Oniha said despite fears on soaring debt, the country will still borrow more as contained in the Medium Term Expenditure Framework and Medium Term External Borrowing Programme, though subject to National Assembly approval.
“We will borrow but also probably elevate what we have done with the sukuk and the green bond. We could introduce new products to support our activities in the domestic market,” she stated.
Figures which she presented to the press in Abuja showed that Domestic Debt for the Federal Government was N12.589 trillion, while the Domestic Debt of States and the FCT stood N3.348 trillion. The External Debt of the Federal Government, States and the FCT, on the other hand, recanted N5.787 trillion, according to her.
The Total Public Debt as at December 31, 2017 represents 18.2 percent of Nigeria’s GDP for 2017. “This shows that Nigeria’s debt continues to be sustainable and is well within the threshold of 56% for countries in Nigeria’s peer group,” she added.
In a new Debt Management Strategy Nigeria is trying to reduce the ratio of Domestic Debt – which government says is costlier – to External Debt to a 60 to 40 ratio.
“This target is being achieved. We will continue with the implementation of the debt strategy that we are running as it is yielding the desired result that have macro benefit,” Oniha said.
The composition of the Debt Stock as at the end of 2017 showed that External Debt was 26.64 percent of the portfolio, up from 20.04 percent in 2016, while Domestic Debt was 73.36 percent, down from 79.96 percent in 2016.
The government thinks that restructuring its debt portfolio could help it reduce soaring Debt Service Costs, interest rates in the domestic market and improved availability of credit facilities to the private sector.
The DMO repaid N198 billion Nigerian Treasury Bills in December 2017 with the proceeds of Eurobond issuances and has also issued $2.5 billion Eurobonds in February 2018.
The proceeds is being used to repay maturing domestic debt, starting with N130 billion NTBs repaid on March 1, 2018.
Oniha said the new borrowings are for financing capital expenditure and stimulating the economy, and that the funds injected through the borrowings strongly supported the implementation of the Federal Government’s budget which helped the country to exit recession in 2017.
Reacting to concerns over the excessive borrowing by government, the DG explained, “As a debt management office what we do is replace high cost domestic debt with low cost external debt, which means debt service won’t grow as rapidly as it was before because we borrow at 7-9% compared to 17% that we borrowed before.
“There is a strategy of generating more revenue from non-oil sources and enforcing compliance, then incremental revenue from what government have done and customs.”
She however, said that government expectation going forward is that the country’s debt service to revenue ratio will still be high, particularly as government tries to grow the economy.
“Also the government is focusing on generating more revenue, as we know about VAIDS at the federal level, improving the customs collection and as far as revenue is concerned the government is working waivers and excise and custom duty on alcohol to generate money.
She said if government’s revenue grow from medium to long term, the budget will be more balanced, reducing the new borrowings while improving debt service to revenue. “That is our outlook,” she stated.
Onyinye Nwachukwu & Cynthia Egboboh, Abuja
