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FEC approves new debt management strategy
DMO reveals approval of new debt management strategy 2020-2023 by FEC
The Federal Executive Council (FEC) at its meeting on Wednesday, February 10, approved a new Medium Term Debt Management Strategy (MTDS) for Nigeria, for the period 2020-2023.
This was contained on the official website of the Debt Management Office (DMO).
According to the DMO, the MTDS was a policy document that provided a guide to the borrowing activities of a government in the medium-term, which is usually four years.
It said: “it is recognised as one of the best practices in public debt management and is recommended by the World Bank and International Monetary Fund (IMF).
“This is to ensure that public debt management is driven by a well-articulated strategy that is structured to meet a country’s broader macroeconomic and public debt management objectives.
“The MTDS, 2020-2023 has been prepared by the DMO, in collaboration with Federal Ministry of Finance, Budget and National Planning and the Central Bank of Nigeria (CBN).
“Other collaborating stakeholders are the Budget Office of the Federation, National Bureau of Statistics, and the Office of the Accountant-General of the Federation.”
The DMO revealed that Nigeria has had two previous MTDS (2012-2015 and 2016-2019), prior to the current Strategy, which was designed with a consideration of the impact of the COVID-19 pandemic.
“The new Strategy had to be re-worked to reflect the global and local economic impact of the COVID-19 pandemic and it incorporates data from the revised 2020 Appropriation Act and the Medium-Term Expenditure Framework 2021-2023.
“The new MTDS adequately reflects the current economic realities and the projected trends. The preparation of the MTDS usually involves the consideration of alternative funding strategies available to the government.
“It seeks to meet its financing needs, taking into consideration the cost of borrowing and the associated risks, while ensuring debt sustainability in the medium to long-term,” the DMO explained.
Debt incurred by the Federal Government
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As of Q4 2020, the total public debt (External and Domestic) incurred by Nigeria stood at N32.22 trillion ($84.57 billion).
This represents an additional N6.01 trillion when compared to N26.21 trillion recorded as of the corresponding period of 2019.
This is according to the Nigerian Domestic and Foreign Debt report, released by the National Bureau of Statistics (NBS).
A cursory look at the breakdown of the domestic debts shows that 73.53% (N11.65 trillion) were in form of Federal Government bonds, 17.17% (N2.72 trillion) in Treasury bills, followed by Promissory Notes accounting for 6.13% (N971.9 billion) of the total federal government domestic debts.
Others include; FGN Sukuk (N362.6 billion), Treasury Bonds (N100.9 billion), Green bond (N25.7 billion), and Savings bond (N12.6 billion).
On the 31st of December 2020, President Buhari signed the 2021 appropriation bill of N13.59 trillion into law, which 25.7% higher than the revised 2020 budget of N10.8 trillion.
However, the budget comes with a deficit of N5.6 trillion, which is expected to be financed mainly through borrowings both externally and domestically.
According to the minister of Finance, Budget, and National Planning, Dr. Zainab Ahmed, during a budget presentation, N2.34 trillion will be sourced each from domestic and foreign sources respectively, N709.69 billion from Multilateral/bilateral loan drawdowns, and N205.15 billion from privatisation proceeds.
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