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FG to borrow N100bn from the local market next week



Interbank rate drops to 3.5 percent

The Federal Government, on Tuesday, said it would raise N100 billion bond from the local market next week as part of its budget deficit funding plans.

This is part of the N390 billion the FG plans to borrow by the end of the first quarter of of the year in the local market.

The FG hopes to borrow a total of N984 billion in local bond issue in its 2016 fiscal plan.

In the breakdown of the instrument, a N40 billion worth of the bond will be issued with a maturity date in 2036, another N40 billion of the paper maturing in 2026 and the balance N20 billion of the debt maturing in 2020.

According to the Debt Management Office, DMO, N60 billion worth of the instruments with 2026 and 2020 maturity dates are re-openings of the previously issued papers, while the 2036 dated instrument is a fresh issue, adding that it would issu between N40 billion and N60 billion in fresh instruments in each of the first three months of the year.

It would be recalled that the Federal Government had said it plans to raise N984 billion in domestic borrowing and N900 billion from foreign debt market to fund the N2.22 trillion deficit in the N6.08 trillion 2016 budget.

Read also: 2016 Budget: N2.22trn deficit’ll mortgage Nigeria’s future – PDP

The deficit is expected to take the country’s overall debt profile to 14 per cent of the gross domestic product, GDP.

However, the plan borrowing to fund budget deficit has been criticized by a member of the Monetary Policy Committee of the Central Bank of Nigeria, Abdul Ganiyu Garba.

According to him, it was wrong for government to borrow N2.2 trillion on an ill-perceived premise that debt to GDP was still low and that there was room for more borrowing.

He contended that it was the same thing that caused the debt crisis of the 1990s which led to the Paris Club deal, advising the Federal Government to judiciously use the TSA savings rather than focus on borrowing more.

Garba said: “The implications of a planned increase in public debt by over N2.2 trillion will become obvious: increase in debt from N10.5 trillion to N12.7 trillion, crowding-out of private borrowers, including small and medium scale firms that have higher growth and employment elasticities, a rise in interest rates, adverse effects on investment, hence employment and growth and the likelihood that debt service in the 2017 budget would significantly exceed the 22 per cent of the proposed 2016 budget”.

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