Nigeria’s total external and domestic debts rose to N24.387 trillion in 2018. This was disclosed today in Abuja by the Director General of the Debt Management Office (DMO), Ms Patience Oniha.

While analysing the public breakdown of the nation’s public debt, Ms Oniha reportedly revealed that the Total Public Debt stood at N24.387 trillion as at December 31, 2018, representing a year-on-year increase of 12.25% in Nigeria’s debt stock.

Some Breakdown

The breakdown of the debt stock revealed that the Federal Government of Nigeria’s (FGN) external debt increased by 42.69%,  from N4.527 trillion in 2017 to N6.460 trillion in 2018.

On the other hand, the FGN domestic debt only increase by 1.46%. In 2018, FGN domestic debt stood at 12.7 trillion up from 12.5 trillion in 2017.

Also, the total sum of the external and domestic debt stock of the 36 states and the Federal Capital Territory (FCT) was put at N5,152 trillion. This is further broken down as N3,853 trillion domestic debts, and N1.29 trillion external debts.

According to the DMO boss,

Business day

“The DMO strategy of using relatively cheaper and longer tenUred external funds is achieving the expected objectives.

“Some of the objectives were to create more space for other borrowers in the domestic market AND extend the average tenUr of the debt stock in order to reduce refinancing risk and increase External Reserves.”

Borrowing will improve key sectors

According to the DMO boss, the implementation of cheap and long-tenured external debt led to an injection of N855 billion 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% p.a. in 2017 to 14 – 15% p.a. in 2018.

Also, Ms Oniha reportedly stated that the N3.4 trillion Promissory Notes Issuance to is basically to be used for the settlement of Inherited Local Debts and Contractual Obligations of the Federal Government.

The programme reportedly covers Contractors; Exporters; Judgement Debt; State Governments and Oil Marketing companies. Specifically, the features of the promissory notes to be issued are such that it will serve as Sovereign and Negotiable Instruments.

Deal book 300 x 250

Promissory Notes issued to provide stimulus to the economy

The DMO boss noted that the benefits of issuing the promissory notes are to provide stimulus to the economy and unlock investment across a number of sectors currently having liquidity issues.

Also, Ms Oniha stressed that it will have a positive impact on the non-performing loan ratios of banks which will, in turn, increase the banks capacity to lend. It will also enable the Federal Government to formally recognise and account for its true liabilities in line with the International Public Sector Accounting Standards (IPSAS).

Nigeria debt plan for 2019 and DMO outlook 

DMO reportedly highlighted some of its major plans in 2019 to include undertaking 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. According to Oniha,

“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.”

Also, the DMO explained that it plans to focus on the management of risks associated with the Debt Stock to mitigate Debt Service Costs.

2019 budget deficit will be funded by 88.7% borrowed fund

Similarly, it has also been revealed that in 2019, 88.7% of the deficit in the 2019 budget will be funded by borrowing.

Basically, the 2019 Budget Deficit was put at N1.859 trillion. But if passed by the National Assembly, new borrowings have been put at N1.649 trillion.

According to Oniha,

“the New Borrowing in 2019 (subject to NASS Approval) will be a 50-50 split for Domestic and External both at N824 billion. The domestic borrowing component also known as FGN Bonds, will sourced from Sukuk, Green Bond and Savings Bond

while the external (N824 billion) will be largely Concessional, Cheaper and will help reduce Debt Service Cost. Longer-term funds for infrastructure, used to create space for private sector borrowing and Increase External Reserves.”

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