2019: FG targets Next Level of borrowing to rebalance foreign, local debts ratio
Fresh revelations from the Federal Government’s Strategic Debt Management Plan 2018 – 2022 sighted by Business Hilights Abuja Bureau Chief has disclosed that the apex government plans to borrow more from foreign sources in 2019 in order to rebalance the ratio between foreign and domestic debts.
The report sourced from the Debt Management Office (DMO), added that government has concluded plans to attain 40 per cent on foreign debt component of public debt by December 2019.
Already, several development economists and even international financial organizations have continued to harp on the dangerous jump of Nigeria’s debt profile, but the government had continued also, to maintain that total debts are yet to hit a crisis level.
However, DMO was of the conviction that contracting more foreign debt is to take advantage of cheaper lending rates abroad and a bid to free the local debt market to enable the private sector to access more funds.
The agency domiciled in the presidency averred that “Following the expiration of the Third Strategic Plan (2013 – 2017), and in recognition of the evolving roles of the DMO, and the need to align public debt management activities with government’s economic policy thrust, as encapsulated in the Economic Recovery and Growth Plan, among others, the need to develop a new Strategic Plan therefore, became imperative.
“The building blocks for the Fourth Strategic Plan are: Changing investor needs and higher investor expectations from the DMO on products and services; government’s prioritisation of the development of infrastructure which requires new and more creative ways of financing; the active and supportive role expected of the DMO under the ERGP, two of whose pillars are reducing the infrastructure gap and a private sector-led growth.”
Currently, Nigeria’s total debt of N22.38tn as of June 30, 2018 is composed of N15.63tn local debt and N6.75tn foreign debt.
DMO noted that whereas the percentage of foreign debt currently stands at 30.17 per cent while the percentage of local debt currently stands at 69.83 per cent, to achieve the target of 40 per cent foreign debt, the country therefore will need to increase foreign borrowing by another 10 per cent in the next 13 months.
The document further revealed that apart from targeting an optimal debt portfolio mix of 60:40 for domestic and external debt by the end of December 2019, the strategic plan also targets to attain 75:25 ratio for long and short-term debt instruments in the domestic debt portfolio within the same timeframe.
Just as the plan hopes to keep the share of debt maturing within one year as a percentage of total debt portfolio at not more than 20 per cent, DMO is also of the idea that setting a target of Average Time-to Maturity for the Total Debt Portfolio at a minimum of 10 years will be ideal after all.
Statistics showed that Nigeria’s external debt commitment rose by $11.77bn in the last three years as the foreign debt component rose from $10.32bn as of June 30, 2015 to N22.08bn as of June 30, 2018.
Accordingly within the space of current administration, federal government grew its external debt commitment by 114.05 per cent in the last three years.
