Nigerian Govt Plans to Borrow N1.5trn in 2020 – DMO

By Tony Obiechina, Abuja

Nigerian Government plans to borrow about N1.5 trillion  this year to enable it finance some key projects including roads as provided for in the 2020 Appropriation Acts. 
This amount, according to the Director General of the Debt Management Office (DMO), Ms Patience Oliha comprises N850 billion and N744.99 billion for External and Domestic Borrowings respectively.
Oliha who spoke at an interactive session with journalists in Abuja while unveiling the DMO plans for 2020, said the New Domestic Borrowings will be raised through FGN Bonds,  Sukuk, FGN Bonds and possibly Green Bonds. 
 “For External Borrowings the strategy is to first seek out concessionary and semi concessionary loans due to the lower interest rate and longer tenors. Any shortfall thereafter may be raised from commercial sources”, she said.
The Director General however, explained that the level of New Borrowings in the Appropriation Acts declined consistently since Nigeria exited the recession in the year 2017.
According to her,  “the increase in the New Borrowings in the Appropriations Acts between 2015 and 2017 was due to the need to stimulate growth and create jobs in the economy as contained in the Economic Recovery Growth Plan (ERGP)”.
She disclosed that the Total Public Debt, comprising the Debts of the FGN, 36 States and the Federal Capital Territory (FCT) as at September 2019 stood at N26.215 trillion. 
A breakdown of the amounts shows that the comparative figure for September 2018 was N25.701 Trillion which implies that in the 12 months period to September 2019 the Total Public Debt grew by 16.88%.
A further  breakdown indicates that the Total Public Debt as at September 2019 includes Promissory Notes in the amount of N812.650 billion which had been issued to settle the FGN’s arrears to Oil Marketing Companies and State Governments under the Promissory Programme approved by the Federal Executive Council and the National Assembly.
Although the 2019 Appropriation Act provided for a total New Borrowing of N1, 605.63 Trillion split equally between Domestic and External, only the domestic component of N802.82 Billion was raised due to the late passage of the 2019 Appropriation Act and the expectation that the implementation of the 2020 Budget would commence on January 1, 2020.
Highlighting the achievements of the DMO in 2019, the Director  General listed the issuance of a 30-year FGN Bond for the first time, the introduction of the 30-year Bond to meet the investment needs of long-term investors such as insurance companies and support the development of the domestic financial markets in areas such as mortgages. 
According to her,  “From the FGN perspective the 30-year Bond also contributed to reducing the refinancing risks of the Public Debt Stock. The product has enjoyed a strong demand as N284.391 billion had been issued by the end of September 2019.
“The Ratio of Domestic Debt to External Debt at 69:31 as at September 2019 was an improvement over the Ratio of 71:29 as at September 2018 compared to 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 was 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.
“The low revenue base of Nigeria relative to its GDP is clearly reflected in the high Debt Service to Revenue Ratio. 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 added. 

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