The Nigerian government has raised its borrowing limit from 25 per cent of its Gross Domestic Product (GDP) to 40 per cent, the Debt Management Office (DMO) disclosed this in a document.
The DMO said the Federal Executive Council (FEC) at its meeting on February10 approved the new Medium-Term Debt Management Strategy for Nigeria, for the period 2020-2023.
According to the debt management body, it will target a 10-year average tenor of obligations in its portfolio, mainly from the domestic markets, with long-term securities making up at least 70% of the stock.
The new strategy will also ensure that government debt is sustainable, the DMO said.
“Nigeria has had two (2) Medium Term Debt Management Strategies (2012-2015 and 2016-2019), prior to the current Strategy,” the DMO said in the statement Wednesday.
“The new Strategy had to be re-worked to reflect the global and local economic impact of the COVID-19 Pandemic and incorporates data from the revised 2020 Appropriation Act and the Medium-Term Expenditure Framework 2021-2023. Thus, the new MTDS adequately reflects the current economic realities and the projected trends.”
The New Diplomat reports the IMF had in its latest report said Nigeria’s public debt is projected to increase to 34% of GDP in 2020 from 29% in 2019, and will rise to about 36.4% in the medium term.
Interest payments as a proportion of revenues, estimated at 92.6% in 2020, are projected to decline to 60.8% in 2021. The figure would rise to 94.1% of revenue by 2025, the lender said.
Analysts have said Nigeria needs to effectively manage its debt-service costs, grow revenue and cut down on waste.
“The implementation of the Medium-Term Debt Management Strategies over the years, has helped in managing the structure of the growing public debt, and ensured debt sustainability, as well as effectiveness in public debt management,” the DMO said.
“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,” the document added.