- FG Targets 16% Reduction in Domestic Debt
The Federal Government plans to reduce the proportion of the country’s domestic debt by 16 per cent in order to lower the sustainability challenges posed by high interest payment on that part of the country’s total debt burden.
The Director-General, Debt Management Office, Patience Oniha, who confirmed this in a telephone interview with our correspondent on Monday, said the plan would involve reducing the country’s domestic debt to 60 per cent, while raising the external component to 40 per cent.
Nigeria’s debt statistics show that the country’s debt ratios stand at 76.57 per cent for domestic and 23.43 per cent foreign. The country’s total debt burden as of June 2017 stood at N19.63tn. This is made up of N15.03tn in local debt and N4.6tn in foreign debt.
Because of high interest rate payment on the domestic debts ranging from 13 per cent to 22 per cent, the Federal Government plans to borrow $3bn from the international market to refinance some of the nation’s domestic debts.
Answering question on whether the new refinancing plan would stop domestic borrowing, Oniha said the Federal Government would continue to borrow from the domestic debt market to meet already laid down obligations.
However, she added, that it would borrow in way to mix the sources to achieve 16 per cent reduction in the domestic component of the total debt burden.
The DMO boss stated, “The current borrowing in the domestic market is for the 2017 Appropriation Act and refinancing. The $3bn is intended to be used to refinance the short-term component of the domestic debt. Don’t forget that the $3bn is yet to be raised.
“Going forward, the objective is to work towards achieving the 60:40 ratio in the way we mix our borrowing between domestic and external.”
By implication, the plan will also increase the country’s external borrowing by 16.57 per cent in order to raise it from 23.43 per cent to 40 per cent.
Concern over the country’s debt sustainability have heightened as a result of dwindling revenues with the debt to revenue ratio increasing from 35 per cent in 2015 to 60 per cent in 2016 despite a healthy debt to Gross Domestic Product ratio of about 18 per cent.