There is a strong possibility that Nigeria may revert to the high level of international debt that saw the country paying out significant portion of the annual national budget in debt servicing, prior to the debt forgiveness programme executed by the Obasanjo administration between 2004 and 2006, says Dunn Loren Merrifield, an investment banking institution.

Raising this alarm while reviewing activities in the bonds market, Tola Odukoya and Jide Nwaogwugwu, both financial analysts with the firm, affirmed that continuous issue of eurobond in order to keep domestic debt profile down was counterproductive.

They said, "In view of its drive to reduce domestic borrowing, the Debt Management Office, DMO, on behalf of the Central Bank of Nigeria, CBN, may issue a second eurobond of US$600 million (N96 billion). At present, Nigeria seeks to reduce domestic borrowing to N500 billion in the medium term from N744 billion in 2012.

OKONJO-Iweala in SENATE--From Left, Minister of State for Finance, Dr. Yerima Ngama , with the Minister of Finance , Dr Ngozi Okonjo-Iweala at the Senate Joint Committee on Appropriation, and Finance interactive session on the implementation of 2012 budget at the National Assembly Abuja.

"In addition, the eurobond is expected to significantly reduce the country's high debt service payments in view of the prevailing high interest rates in Nigeria," they noted in the report.

They noted that instead, there should be a concerted approach to economic management by both fiscal and monetary authorities. "On the fiscal side, we would like to see a wider tax net with a view to raising more revenues and significantly diluting the contribution from the oil sector to total revenues to government.

"This is in addition to the current widespread knowledge of the need to diversify the domestic economy from being a mono-product economy. We would equally like to see an aggressive drive for Nigeria to have a budget surplus in the medium term as a result of the current fiscal consolidation effort.

"These should then be complemented with single-digit interest rate levels on the monetary side with the preoccupation being to stimulate domestic production, output and real growth with a positive impact on individuals, households and firms," they said.