“Don’t Borrow Above $22 Billion” – Debt Management Office Warns Buhari

The Debt Management Office, DMO, has

advised the Federal Government not to

borrow above $22.08 billion in 2017.

The DMO gave the recommendation on

Tuesday in its 2016 Debt Sustainability

Analysis (DSA) report, obtained by the

News Agency of Nigeria in Lagos.

In the report, DMO stated that the end-

period on Net Present Value (NPV) of the

Total Public Debt-to-GDP ratio for 2016 for

the Federal Government was projected at

13.5 per cent.

”The maximum amount that can be

borrowed (domestic and external) by the

Federal Government of Nigeria in 2017,

without violating the country-specific

threshold, will be 22.08 billion dollars (i.e.

5.89 per cent of 374.95 billion dollars).

”The Debt Management Strategy,

2016-2019 provides for the rebalancing of

the debt portfolio from its composition of

84:16 as at the end of December, 2015 to

an optimal composition of 60:40 by the end

of December, 2019 for domestic to external

debts, respectively.

It explained that the development

supported the use of more external finance

for funding capital projects, noting that the

policy was in line with the focus of the

present administration on speeding up

infrastructure development in the country.

The DMO stated that it would achieve this

by substituting the relatively expensive

domestic borrowing in favour of cheaper

external financing.

”This policy stance has been reinforced by

the recent deterioration in macroeconomic

variables, particularly with respect to the

rising cost of domestic borrowing.

”Hence, the shift of emphasis to external

borrowing would help to reduce debt

service burden in the short to medium-term

and further create more borrowing space

for the private sector in the domestic

market.

”Accordingly, for the fiscal year 2017, the

maximum amount that can be borrowed is

22.08 billion U.S. dollars and it is proposed

to be obtained from both the domestic and

external sources as follows:

”New Domestic Borrowing 5.52 billion U.S.

dollars (equivalent of about N1.6 billion)

and New External Borrowing: 16.56 billion

U.S dollars (equivalent of about N4.8

billion).”

The DMO also emphasised that the

recommendation was made, taking into

account the absorptive capacity of the

domestic debt market and the options

available in the external market.

Nigeria’s total debt portfolio rose 30 per

cent to $62 billion in 2014, up from $47.6

billion as at September 2013.

The country’s external debt stood at $9.52

billion, 15 per cent of the entire debt stock.

Domestic borrowing, however, accounted

for bulk of the total money owed by

Africa’s largest economy.

Prior to the 2005 debt relief, bad debt

management practices led to the payment

of $4.9 billion yearly on debt servicing.