May 17, 2022

DMO Set To Rebalance FG’s Debt Portfolio


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Patience Oniha, DG DMO

The Debt Management Office, DMO, says the planned external financing of $2.50 billion is to rebalance the Federal Government’s debt portfolio.

In a statement made available to THE WHISTLER on Thursday, the debt office says the development which is in line with Nigeria’s Debt Management Strategy, will see an increase in external borrowing and a reduction in domestic borrowing.

The DMO explained that it has a target of rebalancing the country’s debt portfolio from the current position of about 25:75 ratio for external to domestic debt to 40:60, respectively.

The Office was quick to point out that the financing of the $2.50 billion will not lead to an increase in the Nigeria’s 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, which has a target of a 40:60 ratio for external to domestic debt from the current position of about 25:75, respectively,” the statement reads.

The DMO said the proceeds of the Refinancing Plan will be converted and 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,” the statement added.

Recall that in December 2017, the federal government redeemed matured Nigerian Treasury Bills (NTBs) with proceeds of $500 million Eurobonds issued in November 2017.

The DMO explained further that the country saved about N17 billion per annum in debt service cost, and recorded significant drop bid rates at the Auctions of both NTBs and FGN Bonds in December 2017 and January 2018 from 16% to about 13.5%.

The drop according to the debt office led 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.

The debt substitution will also help to lengthen the maturity profile of the portfolio and leave more borrowing space for the private sector to access credit to grow the real sector, including export which will increase the foreign exchange earning capacity of the economy.


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