DMO defends Nigeria’s N10tr debt

By IAfrica
In Nigeria
Aug 19th, 2014
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There is no need to worry about Nigeria’s over $66 billion (over N10 trillion) Nigeria’s total publicly borrowed funds, the Debt Management Office (DMO) has said.

The money was well invested, DMO Director General Dr. Abraham Nwankwo said.

Nwankwo spoke at an interactive session with Finance reporters in Abuja.

He said: “Our total domestic debt for both the Federal Government, states and the FCT is about N8.9 trillion (about $48 billion) and the external debt is about $9.38 billion. If you combine the two in one currency, you will find the debt to GDP ratio is about 12.51 per cent, which is much lower than the 26 per cent debt to GDP that is allowed countries in our peer group.”

Of the amount borrowed, the states’ and the FCT’s portion of the domestic debt is about $10 billion (about N1.151 trillion), excluding the external component which stands at a little above $3billion.

In Nwankwo’s view, one key achievement of the DMO is the development of longer tenor instrument of between two to 20 years in the debt market, which has paved the way for 23 Nigerian companies in the last five years to raise locally N223 billion through the issuance of bonds. “This is a development, which was unthinkable before now where only short term instruments of three months and one year were prevalent,” he said.

Anti-borrowing advocates may have to push their case further. Nwankwo said the government would not shy away from aggressive borrowing, but will allow the private sector to take over in raising cheap funds for the development of the manufacturing, agriculture and other vital sectors while the government will just be a regulator.

The DMO plans to focus on encouraging the private sector to take the front seat “in raising funds for development both locally and internationally to finance most of the projects that the government undertakes and the government would not be tempted to borrow more in view of its current low Debt to GDP ratio as a result of the recently rebased Nigerian economy”.

On the nature of the nation’s debt profile, the DMO boss said part of the Federal Government’s portion, about $1.5 billion raised from the international debt market (the Eurobond) is being invested in the power sector to improve the power.

“The funds is also financing the Nigerian Bulk Electricity Bulk Trader (NBET) and for the Nigeria Gas to power project,” Nwankwo said, adding: “Part of the monies borrowed was used for the dualisation of the Abuja International Airport Road in Abuja ; the dualisation of the Zuba – Anuja Expressway ; the opening of new districts in the Federal Capital Territory and the investment for the upgrade of the cotton industry. There are so many other projects with which these monies have been deployed across the country and they are there for people to see.”

On the international debt market, Nwankwo said Nigeria’s issuance of a Sovereign bond paved the way for nine Nigerian firms to issue bonds at the international debt market, raising $3.4 billion “because Nigeria was already benchmarked and the firms didn’t have to raise the funds at very high cost”.

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