FG to raise foreign debt ratio to 40% in 2019

In a bid to rebalance the ratio between local and foreign debts, the Federal Government has said it plans to increase borrowing from foreign sources in 2019.

The plan is to achieve a ratio of 40% foreign debts to 60% of domestic debts.

The Debt Management Office, DMO disclosed this in its Strategic Debt Management Plan 2018 – 2022, adding that it planned to attain 40 per cent on foreign debt component of public debt by December 2019.

According to DMO, this is to enable government to contract more foreign debt and take advantage of cheaper lending rates abroad and also free the local debt market to enable the private sector to access more funds.

The DMO said: “Following the expiration of the Third Strategic Plan (2013 – 2017), and in recognition of the evolving roles of the DMO, and the need to align public debt management activities with government’s economic policy thrust, as encapsulated in the Economic Recovery and Growth Plan, among others, the need to develop a new Strategic Plan therefore, became imperative.

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“The building blocks for the Fourth Strategic Plan are: Changing investor needs and higher investor expectations from the DMO on products and services; government’s prioritisation of the development of infrastructure which requires new and more creative ways of financing; the active and supportive role expected of the DMO under the ERGP, two of whose pillars are reducing the infrastructure gap and a private sector-led growth.”

Nigeria’s current total debt of N22.38tn as of June 30 is composed of N15.63tn local debt and N6.75tn foreign debt, making the percentage of foreign debt to be 30.17 per cent while the percentage of local debt currently stands at 69.83 per cent.

To achieve the target of 40 per cent foreign debt, the country will have to increase foreign borrowing by another 10 per cent in the next 13 months.

Apart from targeting an optimal debt portfolio mix of 60:40 for domestic and external debt by the end of December 2019, the strategic plan also targets to attain 75:25 ratio for long and short-term debt instruments in the domestic debt portfolio within the same timeframe.

The plan hopes to keep the share of debt maturing within one year as a percentage of total debt portfolio at not more than 20 per cent, while also setting a target of Average Time-to Maturity for the Total Debt Portfolio at a minimum of 10 years.

Nigeria’s external debt commitment rose by $11.77bn in the last three years as the foreign debt component rose from $10.32bn as of June 30, 2015 to N22.08bn as of June 30, 2018.

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