Don't borrow above $22 billion , Debt Office tells Buhari administration

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.

Source: NAN