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Home Markets Fixed Income Securities

Debt Management Office counters CBN, says Nigeria not at risk of debt distress

William Ukpe by William Ukpe
July 14, 2022
in Securities
Buhari approves reappointment of Patience Oniha as DG of Debt Management Office
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The Debt Management Office has stated that Nigeria is not at risk of “debt distress” due to its $15.9 billion Eurobonds.

The DMO made the clarification in a statement on its website in reaction to an alarm raised by Robert Asogwa, a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).

Asogwa had expressed worry over the country’s rising debt, particularly the increasing accumulation of Eurobonds in the external debt component.

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He said, “The unexplained government preference of Eurobonds at high-interest costs, with the associated exchange rate, risk may likely hurt Nigeria sooner than anticipated.

“The escalating fiscal sector deficits with the attendant rising debt ratios are part of the weak links in the domestic economic environment.

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“The poor revenue growth in a period of expanding government expenditures has continued to soar the budget deficit levels in the first quarter of 2022, similar to the trend witnessed in 2021.”

What the DMO is saying

The DMO stated that Asogwa’s statements “may have been made without consideration for the country’s borrowing needs as captured in the Annual Budgets, Medium Term Expenditure Framework and the Debt Management Strategy.”

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  • Explaining further, the DMO stated that the borrowing needs are derived from the Annual Budgets while the borrowing mix is based on the subsisting Debt Management Strategy.
  • It added that successive Debt Management Strategies had always indicated that the Federal Government’s preferred source of borrowing was concessional sources rather than commercial sources like Eurobonds.
  • “For instance, one of the objectives of the Debt Management Strategy 2020-2023 is maximising funds available to Nigeria from multilateral and bilateral sources in order to access cheaper and long tenored funds.
  • “Given the size of new borrowings in the annual budgets over the years, it will not have been proper for the Federal Government to raise all the funds from the domestic market.
  • “That will result to government crowding the private sector and raising borrowing rates. Consequently, some part of the required funding has to be raised externally,” it added

It also revealed that due to these factors, Nigeria accesses concessional and semi-concessional loans as may be available, while issuing Eurobonds to part-fiance the annual budgets and the infrastructure projects contained therein.

To prevent Nigeria from slipping into debt distress, the DMO emphasised the need to generate more revenues, significantly beyond the current levels.

What you should know

  • Nairametrics reported last month that the Debt Management Office (DMO) stated that it is more profitable for Nigerians to invest their funds in the Federal Government of Nigeria (FGN) savings bonds than to save in banks.
  • It added that the FGN savings bond is specifically designed for retail investors, and to encourage financial inclusion.
  • On the country’s disturbing high debt profile, DMO said that government borrowing was not necessarily a problem, provided the borrowings were invested on infrastructure development and investment in the productive sector of the economy.

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Tags: CBNDMOEurobondsMPC

Comments 3

  1. RENTOLOG TECHNOLOGY LTD says:
    July 14, 2022 at 2:00 pm

    Wireless Electricity( An Alternative Product to Fuel and Gas):
    Rentolog electric water technology had been analyzed and found worthy for consumer taste. We give thanks to God who made this innovation possible.
    HOW DO IT WORK?
    When water is supplied to the tank, the water flows into a region, the region is blocked by an arc as in your conventional dam, the pressure of the water will increase, the arc opens and the pressure reduces. According to Bernoulli principle, the lower the pressure increases the speed of the fluid(water) and higher the pressure, the speed (velocity) reduces. The water speed is maintained by Pascal principle, which states the fluid at a point or region is evenly distributed . The flow to a region of empty space , gravity and magnetic field of the magnet pull it towards the turbine as in the mountain fall But for an effective precision the entrance to the turbine region will be small just like in the spark plug in Internal combustion engine. The reason is for the water to concentrate in the blade of the turbine for turning purposes . As the water turns the turbine , Faraday law of magnetic field will occur, the turning of the turbine blade will convert the circular motion to reciprocating motion. A small electric current will be supplied to the coil and the rotor which strengthens the electricity and supplies it to the battery, and your home. The water will flow back to the tank passing through the non return valve to continue the thermodynamic flow equation. This process conserves energy and requires minimum electricity to operate and also it is efficient. The body of the RET system is made of an insulator to prevent escape of electricity .

    Reply
  2. Ini Nathaniel Nkanta says:
    July 14, 2022 at 6:04 pm

    I need you to write another article in reference to the current chaos and protest in Sri Lanka. I remember your bias article comparing our economic situation with that of Sri Lanka. But Nigeria is still standing.

    Reply
    • fatai ade says:
      July 15, 2022 at 6:34 pm

      thank you, they always put other countries that are in bad situation than us…take example Ghana, many pundit always cited Ghana as an example of economy management. so today where is Ghana/

      Reply

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