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Nigerian govt can’t borrow beyond N1.91tn in 2018 – DMO

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Nigerian govt to float second N100bn Sukuk Bond in December

The Debt Management Office (DMO) said the government would not be able to borrow more than $6.25 billion (N1.91 trillion) in the 2018 fiscal year, even as it increased the country’s threshold for total public Debt-to-GDP ratio from 19.80 percent achieved in 2017 to 25 percent in the medium term of 2018-2020.

It said the amount was what the government could borrow without violating the proposed country-specific threshold of 25 percent.

The DMO stated this in its 2017 Report of the Annual National Debt Sustainability Analysis released on Wednesday and obtained by our correspondent.

It added that the new government’s borrowings, which would be sourced at equal ratio, would not exceed $3.125 billion (equivalent of about N953.18 billion) each from domestic and external sources.

“For the fiscal year 2018, the maximum amount of US$6.25 billion that could be borrowed is proposed to be sourced equally (50:50) from the Domestic and External sources, respectively,” it stated.

According to the report, the proposed new limit would afford the Government an ample room to mobilise additional resources to fund investment projects that would facilitate the turnaround of the economy, in line with the aspirations of the Economic Recovery and Growth Plan (ERGP), without jeopardising the country’s debt sustainability.

The DMO arrived at the estimated borrowing limit of $6.25 billion for 2018 fiscal year by deducting the proposed country-specific threshold of Debt-to-GDP ratio of 25 percent from the end-period total public Debt-to-GDP ratio for 2017 for the Federation, which was put at 19.80 percent, leaving a difference of 5.2 percent for the three years and 1.73 percent for each year.

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With $360.6 billion projected as 2018 Gross Domestic Product (GDP), the quantum of borrowing for 2018 would be 1.73 percent of $360.6 billion, translating to $6.25 billion for the year.

The DMO noted that the recommended limits were dependent on the size of the GDP and meant to provide a guide to government’s borrowing activities for the year by ensuring that the self-imposed debt limit is not unduly breached.

Nigeria public debt profile had risen by 25 percent in 2017 from N17.36 trillion at the end of 2016 to N21.7 trillion at the end of December 2017, representing 18.20 percent of the nation’s GDP for 2017.

Meanwhile, the DMO raised a total of N66.9 billion at the Federal Government Bond Auction on July 25 as part of the capital raising for the 2018 Budget.

In a statement on Wednesday, DMO said it offered the bonds at the auction in three tenors of 5, 7 and 10 years to give its diverse investor base an opportunity to choose their preferred tenors.

“Investors showed a strong preference for the 10-year Bond with a total subscription of N50.51 billion compared to the N40 billion that was offered.

“The FGN Bonds at the Auction were allotted at 13.69 per cent for the 5-year, 14.00 per cent for the 7-year and 14.2999 per cent for the 10-year Bond,” it stated.

By Oluwasegun Olakoyenikan….

 

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