Nigeria’s Debt Hits N24.387trn –DMO

Nigeria’s Debt Management Office (DMO) has released the Public Debt Data for the year-ended 2018. The report which includes data on the composition of Public Debt Data, also provided a breakdown of the debt between the federal and the state governments (including the Federal Capital Territory).

The report revealed that the nation’s total Public Debt rose to N24.387 trillion or $79.437 billion as at December 31, 2018 representing a year-on-year growth of 12.25 per cent. The 2018 debt stock is higher than the one recorded in 2017 by N2.662 billion.

Nigeria’s total public debt as at December 31, 2017 was N21.725 trillion, which represented 18.20 per cent of the national debt to GDP for 2017. Details of the report that was presented by the director-general of DMO, Ms. Patience Oniha, however showed that more progress was made towards achieving the target Debt Stock mix of 60% (Domestic) and 40% (External).

African Development Bank (AfDB) had on Tuesday disclosed that Nigeria remained at moderate risk of debt distress. In November 2018, the government issued a Eurobond of $2.9bn which reflects its new debt management strategy of prioritising foreign debt to mitigate the high financing costs of domestic borrowing. It made the remarks in its 2019 Economic Outlook for Africa.

The International Monetary Fund (IMF), the day after, issued a statement where it explained the importance of strengthening domestic revenue mobilisation, including through additional excises, a comprehensive VAT reform, and elimination of tax incentives.

According to the DMO report that was released yesterday in Abuja, the share of Domestic Debt dropped to 68.18 per cent from 73.36 per cent as at December 31, 2017 thereby achieving a Mix of 68.18% and 31.82 per cent in the Debt Stock.

Ms. Oniha said the DMO’s debt strategy of using relatively cheaper and longer tenured external funds is achieving the expected objectives. According to her, some of the objectives were: to create more space for other borrowers in the domestic market, extend the average tenor of the debt stock in order to reduce refinancing risk and increase external reserves. The implementation of the strategy led to an injection of N855 billion through the redemption of Nigerian Treasury Bills in 2018 and a general drop in the federal government’s borrowing rate in the domestic market from over 18% per annum in 2017 to 14 – 15 per cent per annum in 2018.

The DMO stated that the FGN’s Domestic Debt Stock includes N331.12 billion Promissory Notes issued to Oil Marketing Companies and State Governments in December 2018. The DMO stated that some of its major plans in 2019 are to undertake more of project-tied borrowing and access more external borrowing from Concessional Sources. Furthermore, the DMO announced plans to issue 30-year Federal Government of Nigeria Bonds (FGN Bonds) for the first time.

“The issuance of the Bond will 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 FGN,” Oniha assured, adding that another area of focus will be the management of risks associated with the debt stock to mitigate Debt Service Costs.