Nigeria: $2.5bn Won't Increase Nigeria's Public Debt Stock - DMO

9 February 2018

The Debt Management Office (DMO) has said the approved external borrowing of another $2.5 billion through Euro-bond to refinancing the domestic debts will not increase the nation's debt stock.

The DMO made the statement to allay fears in some quarters that the external borrowing will further pile up the existing debt profile of the country. The DMO also said it is prepared to take the necessary steps to help the federal government raise the $2.5 billion for the Euro-bond external borrowing to refinancing her domestic debts.

Minister of finance, Mrs. Kemi Adeosun had while addressing journalists after the weekly Federal Executive Committee (FEC) meeting on Wednesday announced that FEC has approved the $2.50 billion to refinance domestic debts. The minister said estimated proceeds of N762.5 billion will be used to redeem Nigerian Treasury Bills (NTB). The planned external financing of the $2.50 billion is for the refinancing of maturing domestic debt obligations of the federal government, the DMO said in a statement yesterday, adding:

"It is not a new or incremental debt because it will not lead to an increase in the public debt stock." Part of the funds that are expected to be raised through Euro-bond will be to rebalance the federal government's debt portfolio by increasing the external component while reducing the domestic component in line with Nigeria's Debt Management Strategy, which has a target of 40:60 ratio for external to domestic debt from the current position of about 25:75, respectively.

"The proceeds of the planned USD2.50 billion will be converted to Naira and be used to redeem relatively more expensive domestic debt," the DMO reiterated. The move is expected to save about N64 billion per annum in interest cost. It is designed to help reduce the Debt Service/ Revenue ratio and free up the fiscal space for other priorities of Government. In December 2017, the Government redeemed matured Nigerian Treasury Bills (NTBs) with proceeds of $500 million Eurobonds issued in November 2017.

Apart from saving about N17 billion per annum in debt service cost, there was also a significant drop in the Bid Rates at the Auctions of both NTBs and FGN Bonds in December 2017 and January 2018 from a range of 16 per cent to about 13.5 per cent. "This translates to savings for Government on new borrowings, reduction of pressure on lending rates in the economy with positive impact on job creation and poverty reduction," the debt office explained.

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