Nigeria’s Debt Ratios High Despite Increased Borrowing — DMO
The Debt Management Office (DMO) has revealed that Nigeria’s total public debt in terms of debt service-to-revenue ratios was high, despite increased borrowing by the Federal Government.
DMO disclosed this in the ‘Nigeria’s 2021 Debt Sustainability Analysis Excercise’ report released on Thursday.
But the debt to Gross Domestic Product remained at a moderate level, it stated as it tries to allay Nigerians’ fear about the huge debt overhang of the country.
According to DMO, the outcome of the exercise revealed that despite increased borrowings, “the projected ratios of total public debt to GDP at 26.1 per cent and 25.8 per cent in 2022 and 2023 respectively, were below Nigeria’s self-imposed Limit of 40 per cent and within the 55 per cent limit recommended by the World Bank and International Monetary Fund (IMF), as well as Economic Community of West African States’ convergence threshold of 70 per cent.
“The ratio remained within the 40 per cent limit when Guaranteed Loans and the Ways and Means Advances at the Central Bank (CBN), were included.”
The debt office urged that going forward, the sustainability of the public debt would require that government’s revenues be enhanced significantly while it continues to explore more concessional and semi-concessional sources for its borrowing and refinancing needs.
The Debt Sustainability Analysis (DSA) Framework, developed by the WB and IMF is to assess Nigeria in its debt carrying capacity.
Its main objective is to evaluate the country’s ability to meet current and future debt service payments without a default as well as guide the government in its borrowing decisions.
The debt office had the previous day (Wednesday, July 13), in an official press statement, alerted the federal government that its appetite for Eurobond might likely move the country to debt distress.
This had followed a statement allegedly made by a member of the Monetary Policy Committee (MPC) of the CBN.
DMO, in a clarification, said the statement might have been made without due consideration of the government’s borrowing needs as captured in the annual budgets, Medium-Term Expenditure Framework as well as Debt Management Strategy.
It explained that borrowing needs were derived from the annual budgets while the borrowing mix was based on the subsisting Debt Management Strategy.
One of the objectives of the Debt Management Strategy 2020 – 2023 is “Maximizing funds available to Nigeria from Multilateral and Bilateral sources to access cheaper and long-tenured funds, whilst taking cognizance of the limited funding envelopes available to Nigeria, due to Nigeria’s classification as Lower-Middle-Income country,” it stated.
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