Nigeria plans more borrowing, targets 40% debt-to-GDP
Nigeria, Africa’s biggest economy, is looking to increase its debt-to-GDP ratio to 40 percent by 2023 from10.35 percent at the
Nigeria, Africa’s biggest economy, is looking to increase its debt-to-GDP ratio to 40 percent by 2023 from10.35 percent at the end of 2015 as it plans new borrowings.
The country’s total public debt as a percentage of GDP rose to 19 percent in December 2019, according to the Debt Management Office.
Its total public debt stock rose by N1.21 trillion in the third quarter of last year to N32.22 trillion, the DMO said in January.
The Federal Executive Council, at its meeting on Wednesday, approved a new Medium-Term Debt Management Strategy for the country, for the period 2020-2023
“Increased from 25 percent to 40 percent in order to: accommodate new borrowings to fund budget deficits and other obligations of government; promissory notes to be issued to settle government arrears; and, the Ways and Means Advance at the Central Bank of Nigeria,” it said in a statement.
According to the debt office, the ratio is still well below the World Bank/International Monetary Fund’s recommended threshold of 55 percent for countries in Nigeria’s peer group.
“Borrowing will be from domestic and external sources but a larger proportion of new borrowing will be from domestic sources using long-term instruments while for External Borrowing, concessional funding from multilateral and bilateral sources will be prioritised,” it said.
The country set a target of 70 percent for domestic debt and 30 percent for foreign sources, in a bid to “further strengthen the domestic debt market and optimise access to both Concessional and Commercial sources of funding”.
The MTDS is a policy document that provides a guide to the borrowing activities of a government in the medium-term, usually four years.
The DMO said the implementation of the medium-term debt management strategies, over the years, had helped in managing the structure of the growing public debt and ensured debt sustainability, as well as effectiveness in public debt management.
“With the approval of the Federal Executive Council of the MTDS, 2020-2023, the strategy will be implemented to support economic development while ensuring that the public debt is sustainable,” it added.
