Under President Muhammadu Buhari, Nigeria has grown its debt portfolio by N9.61tn, statistics available from the Debt Management Office have shown.
According to the DMO, Nigeria’s debt stood at N21.73tn as of December 31, 2017, while the figure as of June 30, 2015 was N12.12tn.
This means that within a period of 30 months – July 2015 to December 2017 – the country’s debt rose by N9.61tn, or 79.25 per cent.
In a statement made available to our correspondent in Abuja on Wednesday, the DMO said the composition of the debt stock as of the end of 2017 showed that external debt was 26.64 per cent of the portfolio, up from 20.04 per cent in 2016; while the domestic debt was 73.36 per cent, down from 79.96 per cent in 2016.
Further analysis showed that the domestic debt for the Federal Government was N12.59tn, while the domestic debt of the states and the Federal Capital Territory was N3.35tn.
The external debt of the Federal Government, states and the FCT was N5.79tn. This puts the total public debt as of December 31, 2017 at N21.73tn.
According to the DMO, the restructuring of the country’s debt mix has led to an increase in foreign debt in order to minimise the high interest rates of local debts.
The DMO said, “The key benefits of the restructuring of the portfolio are the reduction of the government’s debt service costs, lowering of interest rates in the domestic market and improved availability of credit facilities to the private sector.
“We repaid N198bn Nigerian Treasury Bills in December 2017 with the proceeds of Eurobond issuances and we have continued further implementation of the strategy in 2018, with the issuance of the $2.5bn Eurobonds in February 2018, the proceeds of which is being used to repay maturing domestic debt, starting with N130bn NTBs repaid on March 1, 2018.”
According to the DMO, the borrowings are for financing capital expenditure and stimulating the economy.
The funds injected through the borrowings strongly supported the implementation of the Federal Government’s budget, which helped the country to exit recession in 2017, the agency stated.
It added that the total public debt as of December 31, 2017 represented 18.2 per cent of the country’s Gross Domestic Product for the year.
This shows that Nigeria’s debt continues to be sustainable and is well within the threshold of 56 per cent for countries in her peer group, the DMO said.
Speaking at a press conference to explain the debt status, the Director-General, DMO, Patience Oniha, said the debt grew because the nation went into recession and the government could not abandon the economy but had to spend.
She added that the current government had been spending more on infrastructure than other administrations in the past, adding that any foreign borrowing had to be tied to a project.
Oniha explained that it was necessary for the government to borrow to rebalance its portfolio such that domestic debts that had higher interest rates needed to be reduced with foreign debts at lower interest rates.
She said, “Through the issuance of particularly the FGN Bonds, we were able to transform the domestic debt market. If you look at 15 years ago, who will be talking about FGN Bonds yields? Using government securities to borrow, we have actually transformed the Nigerian market to the extent that there is now a dedicated institution known as the Financial Markets Dealers Quotation.
“We have had the positive sides. What the government is suffering is debt servicing. And that is why we are running a new strategy now. So, what we are saying is, if you look at December 2017, we have improved in terms of the mix of the portfolio.
“As you know, we also issued $2.5bn in February this year to refinance some of the domestic debts. So, give or take, we are at about 30:70 per cent foreign to domestic debt ratio.
“The actual debt service for the year is N1.67tn. Again, there are two issues you should look at there. The external component is only nine per cent, while domestic is 91 per cent. The domestic has grown and the rate has been high.”
Oniha added, “As a government, we have targets. The target is that domestic to foreign should be 60:40 per cent. Are we there yet? No; we are still at 73:27 per cent. We are not there even with the external borrowing we have done.
“The reason for the 60:40 per cent is that you don’t want to put all your eggs in one basket. You don’t want to be dependent on one source for your funding. It is good to have a mix.
“For the domestic component, we said 75 per cent should be long-term, while 25 per cent should be short-term. We defined long-term in terms of FGN Bonds, and short-term in terms of Treasury Bills. Last year, we started by redeeming N198bn of Treasury Bills, but we are still not there yet.”
The DMO boss added that the country’s debt to Gross Domestic Product ratio remained low at less than 19 per cent, but admitted that the debt service to revenue ratio had not been good enough.
She attributed this to the fall in revenue, adding that the Federal Government’s revenue dipped by about 50 per cent.
According to her, the government is addressing the situation by tackling the issues that resulted in low revenue collection by the Nigeria Customs Service.
She added that the problem of tax evasion was being addressed by the Voluntary Assets and Income Declaration Scheme initiated by the Federal Government.
Oniha said through the programme of diversification, the government was also addressing the problem of low revenue generation as a diversified economy would ensure that the country had several sources of income other than oil.
Responding to a question on the possibility of increased interest rate on commercial foreign loans, the DMO boss stated that though Nigeria’s rates were expected to improve with positive developments in the economy, a fundamental assumption was that advanced nations had better interest rates.
