Nigeria govt targets more borrowing to fund budget deficit – DMO

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The Debt Management Office (DMO) said on Wednesday the Federal Government planned to increase its concessionary long-term loans from home and abroad to finance budget deficits and other obligations in the coming years

In a statement on the federal government’s Medium-Term Debt Management Strategy (MTDS), DMO said this is part of the plan to increase total public debt as a percentage of Gross Domestic Product (GDP) from 25 percent to a maximum of 40 percent.

According to the statement, a larger proportion of new borrowing will be from domestic sources using long-term instruments while external borrowing and concessional funding from multilateral and bilateral sources will be prioritized.

DMO said: “The 40 percent ratio is still well below the World Bank and International Monetary Fund recommended threshold of 55 percent for countries in Nigeria’s peer group.”

The statement also indicated that the federal government planned to continue with the Ways and Means Advances from the Central Bank of Nigeria, despite IMF warning to apex bank to stop financing the government’s budget deficits in order to stop soaring inflation.

Ways and Means’s financing is basically the printing of money by the CBN to enable the federal government to plug its budget deficit.

DMO stressed that promissory notes would also be issued to settle government arrears.

On the composition of the debt portfolio, DMO said it intend to spread its borrowing domestically and externally by 70:30 to strengthen the domestic debt market and optimize access to both concessional and commercial sources of funding.

“Average Tenor of debt Portfolio will be minimum of 10 years while long-term will be 75 years. Additionally, short-term domestic debt mix will be 25 years as it aims to effectively manage Refinancing Risks.”

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Meanwhile, Nigeria has borrowed over N20 trillion to help to finance its budgets and fund infrastructure projects in the last six years.

Data from DMO office showed that the debt increased by 161 percent from N12.36 trillion in June 2015 to N32.22 trillion in September 2020.

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