Nigeria’s total debt profile stood at N24.387trillion as at December 31, 2018, the Debt Management Office (DMO) said.
The figure moved from N21.725 trillion in December 31, 2017 to N24.39 trillion in December 31, 2018, showing an increase of N2.66 trillion or 12.25 per cent.
Speaking at a press briefing in Abuja on Thursday, Patience Oniha, Director-General of DMO, said the funds were borrowed to fund projects, to finance budget deficit and to re-finance maturing obligations.
Oniha said some foreign debt was used to refinance treasury bills because of the short tenor of the bills, adding that borrowing from abroad had also helped to stabilise the local currency in the last two years.
The DMO boss said that the Federal Government’s domestic debt stock included N331.12 billion Promissory Notes issued to oil marketing companies and state governments in December 2018.
According to her, some targets that had been set in the country’s Debt Management Strategy had been achieved or nearly achieved. These include the plan to achieve a tenor of 75:25 ratio in favour of long tenor debts.
Oniha said the target had been surpassed as the country now had a 78:22 ratio in favour of long term debts.
“The share of domestic debt dropped to 68.18 per cent from 73.36 per cent as of December 31, 2017, thereby achieving a mix of 68.18 per cent and 31.82 per cent in the debt stock,” she said.
According to the DMO, the 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, 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 N855bn 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 per cent per annum in 2017 to 14 to15 per cent per annum in 2018,” Oniha said.
Oniha said that borrowing for 2019 would be 50-50 split between domestic and external in striving to be consistent with the Debt Management Strategy 2013-2019 aimed at achieving a 60:40 ratio between domestic debt and external debt.
She said, “Relatively low-interest rates mean the government can issue longer-dated bonds to continue to fund infrastructure projects.
“Revenue generating initiatives are expected to improve revenues and reduce the debt service to revenue ratio.”
The DMO boss said that some of its major plans in 2019 included to undertake more of project-tied borrowing and to access more external borrowing from concessional sources.
It also announced plans to issue 30-year FGN Bonds for the first time. The issuance of the bond is expected to 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 Federal Government.
It added that another area of focus would be the management of risks associated with the debt stock and to mitigate debt service costs.
On the issuance of promissory notes, Oniha said, “Federal Executive Council approved the establishment of a Promissory Note Programme.
“The purpose is to use it to settle inherited local debts and contractual obligations of the Federal Government. The programme is estimated at N3.4tn.
“It will provide stimulus to the economy and unlock investment across a number of sectors currently having liquidity issues.”
She said that the programme would also have a positive impact on the non-performing loan ratios of banks, which would, in turn, increase the banks’ capacity to lend.
Oniha said that it would also enable the Federal Government to formally recognise and account for its true liabilities in line with the International Public Sector Accounting Standards.
