* To float N150bn Sukuk for road projects
Ndubuisi Francis in Abuja
Total public debt, comprising the Federal Government of Nigeria (FGN), the 36 states and Federal Capital Territory (FCT) stood at N26.215 trillion as at September 30, 2019, the Debt Management Office (DMO), has disclosed.
This indicates a 2 per cent growth when compared with the the N25.701 trillion recorded as at June 30, 2019.
The DMO Director General, Ms. Patience Oniha, who unveiled the figures during an interactive session with journalists in Abuja, Friday, said the total debt stock implied that in the quarter July to September 2019, a 2 per cent growth was recorded, adding that the debt included promissory notes of N821.651 billion which had been issued to settle the FGN’s arrears to oil marketers and state governments under the Promissory Programme approved by the Federal Executive Council (FEC) and the National Assembly.
A breakdown of the N26.215 trillion debt shows that the domestic component accounted for N17,943.94 trillion, while external debt stood at 8,271.15 trillion.
When compared with the N22,428.80 trillion in the corresponding period of 2018, it shows a 16.88 per cent growth in public debt.
Oniha explained that the ratio of domestic debt to external debt at 69:31 as at September 30, 2019 was an improvement over the ratio of 71:29 as at September 2018 when juxtaposed with the target of 60:40 in the Medium-Term Debt Management Strategy.
“The ratio of long term to short term debt in the domestic debt as at September 2019 was 80:20, which shows that the target of 75:25 had been outperformed by September 2019. Furthermore, it was an improvement over the ratio of 73:23 recorded in September 2018.
“Similarly, total debt as a percentage of GDP of 18.47% as at September 2019 was well within the limit of 25% and fares better in comparison with the debt/GDP ratios of countries such as the United States of America, United Kingdom and Canada with ratios of 105%, 85% and 90% respectively for the same period.
“However, because they generate adequate revenues, their debt service/revenue ratios for the same period were much lower at 12.5%, 7.5% and 7.5% respectively when compared to Nigeria’s 51% in 2017,” she explained.
On criticisms over the nation’s increasing borrowing, Oniha said: “Public borrowing is not done by one person. It is not approved by one man. It is a collective decision. So, when we take on this administration as having borrowed, let us bear in mind that borrowing is cumulative and there are rules and regulations about borrowing. There are laws and procedures that must be complied with.
“In fact, that the document must be presented to the National Assembly is in compliance with the Fiscal Responsibility Act and the DMO Act. So we are complying with the laws on public borrowing.”
According to Oniha, the relatively high level of new borrowing in recent years were triggered by the economic downturn which required increased government spending, stressing that a higher level of borrowing was included in the Economic Recovery and Growth Plan (ERGP) as a strategic tool for stimulating growth, job creation and increasing external reserve.
The DMO DG stressed that the low revenue base of Nigeria relative to its GDP is clearly reflected in the high debt service to revenue ratio, adding that this clearly brings to fore, the need for revenues to grow.
“The efforts towards increasing and diversifying revenue such as the passage of the Finance Act and Strategic Revenue Growth Initiative of the Federal Ministry of Finance, Budget and National Planning should thus be supported,” she admonished.
On the 2020 fiscal year, Oniha said the new borrowings are N850 billion and N744 billion external and domestic respectively.
External borrowings, she disclosed, would be sourced from concessionary and semi-concessionary loans due to the lower interest rate and longer tenors, while domestic borrowings will come from FGN bonds, Sukuk, FGN savings bonds and possibly Green bonds.
According to her, any shortfall thereafter may be raised from commercial sources.
Oniha, who explained that the third Sukuk, which is being planned as a source of financing for the 2020 budget would be in the region of N150 billion and to be targeted to fund 44 road projects as against 25 in 2017 and 28 in 2018.
She also expressed satisfaction with the introduction of the FGN 30-year Bond in April which she noted, has been a ‘greatough’ success with well over N500 billion invested by various sectors, particularly insurers.
“The introduction of the 30-year bond was to meet the investment needs of long-term investors such as insurance companies and support the development of domestic financial markets in areas such as mortgages, ” she said.
The 30-year bond, she added, also contributed to reducing the refinancing risks of the public debt stock.
Oniha noted that the outcome of the implementation of DMO’s Debt Management Strategy had resulted in many of the targets been achieved.