By Kunle Adedoyin
The Debt Management Office (DBO) has disclosed that Nigeria’s total debt profile as of December 31, 2018, now stands at N24.387tn. The figure increased by 12.25 per cent from N21.725tn in 2017 to N24.39tn in 2018.
Statistics provided by DMO in Abuja on Thursday showed that the country’s public debt rose by N2.66tn within the one year period of December 31, 2017 to December 31, 2018.
Patience Oniha, Director General of DMO, said the funds were borrowed to fund projects, to finance budget deficit and to refinance maturing obligations.
She also explained that some foreign debt was used to refinance treasury bills because of the short tenor of the bills, adding that borrowing from abroad had also helped to stabilise the local currency in the last two years.
The DMO boss said that the Federal Government’s domestic debt stock included N331.12bn Promissory Notes issued to oil marketing companies and state governments in December 2018.
Oniha said some targets that had been set in the country’s Debt Management Strategy had been achieved or nearly achieved. These include the plan to achieve a tenor of 75:25 ratio in favour of long tenor debts, which has been surpassed as the country now had a 78:22 ratio in favour of long term debts.
“The share of domestic debt dropped to 68.18 per cent from 73.36 per cent as of December 31, 2017, thereby achieving a mix of 68.18 per cent and 31.82 per cent in the debt stock,” she said.
The DMO has also revealed that the strategy of using relatively cheaper and longer tenured external funds is achieving the expected objectives of creating more space for other borrowers in the domestic market, extending the average tenor of the debt stock in order to reduce refinancing risk and increasing external reserves.
“The implementation of the strategy led to an injection of N855bn 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 per annum in 2017 to 14 to15 per cent per annum in 2018,” Oniha said.
Oniha said that borrowing for 2019 would be 50-50 split between domestic and external in striving to be consistent with the Debt Management Strategy 2013-2019 aimed at achieving a 60:40 ratio between domestic debt and external debt.
“Relatively low-interest rates mean the government can issue longer-dated bonds to continue to fund infrastructure projects.
“Revenue generating initiatives are expected to improve revenues and reduce the debt service to revenue ratio,” she said.
The DMO boss said that some of its major plans in 2019 included pursing more of project-tied borrowing and to access more external borrowing from concessional sources.
It also announced plans to issue 30-year FGN Bonds for the first time. The issuance of the bond is expected to 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 Federal Government.
It added that another area of focus would be the management of risks associated with the debt stock and to mitigate debt service costs.
“Federal Executive Council approved the establishment of a Promissory Note Programme.
“The purpose is to use it to settle inherited local debts and contractual obligations of the Federal Government. The programme is estimated at N3.4tn.
“It will provide stimulus to the economy and unlock investment across a number of sectors currently having liquidity issues,” Oniha said.
She said that the programme would also have a positive impact on the non-performing loan ratios of banks, which would, in turn, increase the banks’ capacity to lend.
Oniha said that it would also enable the Federal Government to formally recognise and account for its true liabilities in line with the International Public Sector Accounting Standards.