DMO: Nigeria to Steer Clear of Global Debt Markets for Now

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Patience Oniha
Director-General, the Debt Management Office (DMO), Ms. Patience Oniha
  • FG will plug deficit in budget 2019 with domestic borrowing

Chika Amanze-Nwachuku in Lagos and James Emejo in Abuja with agency report

Amid growing concern about Nigeria’s huge debt profile, which stands at about N25.7 trillion ($83.88 billion), the Debt Management Office (DMO) has indicated that the country will not tap international debt markets for the remainder of 2019.

Nigeria’s total debt profile, according to information posted by DMO’s website stood at N25.7 trillion ($83.88 billion), comprising N17.38tn ($56.72bn) domestic, and N8.32tn ($27.162bn) external.

The Director-General, DMO, Ms. Patience Oniha, who made the indication in an email message to Bloomberg yesterday, said the federal government would not sell international debt this year because the implementation of the 2019 budget is drawing to a close.  

The federal government issued a record $10.7 billion of international bonds in 2018, and some investors were betting Nigeria would sell more paper in 2019 to cover the budget shortfall, projected at N2.5 trillion  ($6.9 billion).

Bank of America Merrill Lynch strategist Rukayat Yusuf said in a September 9 research note that she expected the government to issue at least $2.6 billion in Eurobonds in the last quarter of the year, reported the Newswire.

Nigeria had proposed the same amount for external borrowing in 2019, which at the official exchange rate of 305 naira per dollar is equivalent to $2.6 billion, according to the finance ministry.

But the DMO boss stated that the government would stick to its new domestic borrowing plan to raise N802.8 billion in 2019.

The DMO had earlier in June refuted reports that the federal government had no plan to issue Eurobonds in 2019.

Oniha explained in a statement then that issuance of Eurobonds to finance the 2019 federal budget had not been foreclosed, but that priority would be given to accessing concessionary funds from multilateral and bilateral sources in the $2.7 billion external borrowing plan in the 2019 budget.

She added that in the event that the federal government could not raise the entire $2.7 billion, it would turn to commercial sources, including the issuance of securities including Eurobonds for the balance. 

Oniha said back then: “For the records, the 2019 Appropriation Act provides for New External Borrowing of N824.82 billion (the equivalent of USD2.7 billion at USD/N305). Consistent with the Debt Management Strategy of reducing debt service cost, the plan for raising the New External Borrowing is to first access cheaper funding from Multilateral and Bilateral lenders as may be available. “Thereafter, any balance will be raised from Commercial sources which may include Securities Issuance such as Eurobonds in the International Capital Market.”

Amid concerns that taking more loans could see an increase in the country’s debt profile rise by over 74 per cent, the Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed at the just concluded Annual Meetings of the International Monetary Fund and the World Bank that Nigeria’s request for a $3 billion World Bank loan to finance her power sector was on the verge of being granted.

The minister insisted that the challenge was not in debt level but how to raise revenue as an alternative to borrowings. The IMF however noted that Nigeria’s Debt-to-GDP ratio “is good but too risky.”

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), at its recent meeting in Abuja, expressed worry that the unabated rise in Nigeria’s public debt remained a headwind to economic growth, irrespective of the momentum increase in private sector lending.

According to the MPC, “The huge concerns expressed in the last MPC meeting about the increases in total public debt remain unabated. Based on the Bond Issuance Calendar of the DMO, there were three additional FGN Bond Auctions in July, August and September to raise money to part-finance the 2019 Federal Budget while additional Issuance of Eurobond is expected in the late part of 2019 or early 2020.

“As the threat of debt vulnerability continues, a coordinated domestic revenue expansion with simultaneous fiscal prudence as suggested in the last MPC meeting still remains the key to addressing the weak fiscal position of the economy,” MPC said.