The Federal Executive Council (FEC) on Wednesday, granted approval for a new medium-term debt management strategy (MTDS), that will assist the government in its borrowing activities for the period 2020-2023.
According to a press statement by the Debt Management Office (DMO), for the period 2020-2023, Nigeria’s borrowings will consist of both domestic and external sources, with a larger proportion of new borrowings coming from domestic sources using long-term instruments, while for external borrowing, concessional funding from multilateral and bilateral sources will be prioritised.
Part of the targets in the new MTDS document includes raising total debt to GDP from the current 25 percent to 40 percent. This is to accommodate new borrowings to fund budget deficits and other obligations of government, promissory notes to be issued to settle government arrears, and, the ways and means to advance at the Central Bank of Nigeria.
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The new ratio is still well below the World Bank and International Monetary Fund recommended threshold of 55 percent for countries in Nigeria’s peer group.
Also to further strengthen the domestic debt market and optimise access to both concessional and commercial sources of funding, portfolio composition would stand at a maximum of 70 percent for domestic debt while external debt would be minimum of 30 percent.
The DMO noted that to sustain the issuance of longer-tenor instruments with tenors of 10 years and above, and in order to effectively manage to refinance risks, the average tenor of debt will have a minimum of 10 years, while long-term and short-term domestic debt markets will have a minimum of 75 percent and a maximum of 25 percent respectively.
Achievements recorded in the previous 2016-2019 MTDS include total public debt percentage of GDP at 19 percent below the maximum target of 25 percent, while domestic and external debt mix recorded significant improvement.
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