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DEBT: Nigerian govt to cut down on domestic short-term borrowing

DMO: Domestic debt servicing increased by over N247bn in 2017

The Debt Management Office (DMO) has said the Federal Government will be cutting down on domestic short term borrowing in order to achieve longer maturity for its debt portfolio by a ratio of 75 percent of its domestic debts.

The DMO revealed this in its Risk Analysis of the Federal Government of Nigeria’s Total Debt for 2017.

According to the DMO, the refinancing risk of the government’s debt portfolio was very high due to the presence of a large proportion of domestic debt maturing within a period of one year.

The analysis also stated that about 32.61 per cent of Federal Government’s domestic loan portfolio matures within a period of one year, thereby exposing the total public debt to refinancing risk.

According to the DMO, government’s target was to achieve 20 per cent for debts maturing within a period of one year but this could not be achieved as the proportion of such debt to the total debt portfolio stood at 23.53 per cent as of December 31, 2017.

The DMO further said that the refinancing risk for foreign debt was low because it enjoyed an Average-Time-to-Maturity of 14.26 years.

“The Average-Time-to-Maturity of the FGN’s Total Public Debt portfolio as of December 31, 2017, was 11.55 years, which was above the strategic minimum of 10 years, indicating lower exposure of the portfolio to refinancing risk.

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“However, the high proportion of debts maturing within one year was 23.53 per cent, higher than the targeted maximum of 20 per cent, suggesting that the total debt portfolio was exposed to higher refinancing risk.

“While refinancing risk was low for external debt portfolio with ATM (Average-Time-to-Maturity) of 14.26 years, it was very high for domestic debt with ATM of 7.78 years and debt maturing in one year at 32.61 per cent.

“This was attributed to the presence of high proportion of short-term debt in the domestic debt portfolio.

“Part of the debt management strategy of gradually reducing the issuance of short-term debt instruments would be helpful in mitigating the risk and contribute in attaining the strategic target of 75:25 ratio for long to short-term debts in the domestic debt portfolio by the end of the year 2019″, the DMO said in the analysis.

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Ripples Nigeria

We are an online newspaper, very passionate about Nigerian politics, business and their leaders. We dig deeper, without borders and without fears.
www.ripplesnigeria.com

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