The federal government sourced about N410 billion funding from the domestic financial market to finance the 2018 capital budget, the Debt Management Office (DMO) said on Tuesday.
About $3 billion was raised through Eurobond to refinance maturing domestic debts as part of the debt management strategy to replace high-cost domestic debt with lower external debt.
The Director General of the debt management agency, Patience Oniha, disclosed this in Abuja while presenting the update on the country’s public debt as at June 30, 2018.
Mrs Oniha said the funding was part of the N793 billion also borrowed from the domestic market this year.
The DG gave the country’s debt stock as at June 30, 2018, at about N22.4 trillion, or $73.2 billion.
The figure consists of domestic and external debt stock of the federal and the 36 state governments and the Federal Capital Territory (FCT).
Compared to the debt figure for March 2018, Mrs Oniha said the debt stock actually decreased by 1.44 per cent from N22.71 trillion to N22.4 trillion.
The decrease, she explained, was due to a 3.38 per cent decline in the federal government debt stock between March and June, 2018 and 2.75 per cent in the domestic debt of states.
She disclosed that the federal government’s domestic debt declined from N12.59 trillion in December 2017 to N12.58 trillion in March 2017 and N12.15 trillion in June 2018.
She attributed the reduction to the redemption of N198 billion Nigerian treasury bills in December 2017 and another N639 billion between January and June 2018.
Mrs Oniha said the total debt figure, which is a marginal increase of 3.01 per cent over the figure for December 2017, was as a result of the $2.5 billion Eurobond issued in February 2018.
Although she said government’s plan was to borrow about N1.643 trillion in 2018, the DMO was yet to commence external borrowings for the year due to the approval of only N850 billion external/foreign borrowing under the 2018 Appropriation Act.
Mrs Oniha dismissed insinuations that the huge borrowing by the government between 2015 and mid-2018 was excessive.
“All government borrowings follow rigorous interrogation by the legislature before passing the requisite Appropriation Act to support the borrowing implemented by the DMO.
“If the government did not borrow so much in the last three years, it would not have been able to function as a government. The huge borrowing became necessary, following the fall in revenue as a result of the fall in the price of crude and the attendant devaluation of the Naira from the use of the external reserve to defend the National currency,” she explained.
The DMO boss noted that the implementation of the Public Debt Management Strategy whose overall objective “is to ensure that Nigeria’s debt is sustainable, is already yielding positive results.”
Some of the beneficial outcomes, she stated, included the rebalancing of the country’s debt stock; reduction of the domestic to external debt ratio from the 60:40 target to 75:25 between long term and short term domestic debt.”
The domestic and external debt ratio as at June 30, 2018, the DMO boss said, stood at 70:30 compared to 73:27 in December 2017.
Similarly, the ratio between long-term domestic debt to short-term domestic debt was 76:24 in June 2018 compared to 72:28 in December 2017.
On the impact of the DMO activities, Mrs Oniha said this resulted in lower interest rates for the benchmark FGN securities from about 18.5 per cent in January 2017 to 11-14 per cent in the first half of 2018.
Also, with the redemption of about N840 Billion of Nigerian Treasury Bills more funds were available for lending by banks to the private sector. External capital raising activities also contributed to the increase in external reserves.
On the State governments’ indebtedness and their capacities to pay back, the DMO DG said by law they were not allowed to borrow more than 40 per cent of their internally generated revenue (IGR) to allow for the remaining 60 to be used to run their states.