We’re set for another domestic debt refinancing – DMO

By Chizoba Ogbeche

Abuja

Debt Management Office (DMO) is set for the next stage of refinancing of domestic debt in a bid to rebalance the federal government’s debt portfolio.
A press statement by the DMO, yesterday in Abuja, said the planned external financing of $2.50 billion is for the refinancing of maturing domestic debt obligations of the federal government.
The statement read in part: “It is not a new or incremental debt because it will not lead to an increase in the public debt stock. The purpose is 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.”
The office explained that Nigeria’s debt management strategy 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 $2.50 billion will be converted to Naira and be used to redeem relatively more expensive domestic debt.
“This is expected to save about N64 billion per annum in interest cost which will help to reduce the debt service/revenue ratio and free up the fiscal space for other priorities of government.”
DMO stated: “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.”

 

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