Despite worries by economists over the rising debt profile of Nigeria, Debt Management Office (DMO) has insisted that the country does not face the risk of experiencing debt distress.
Nigeria’s total debt is N41.60trn or $100.07bn, which represents the domestic and external debt stocks of the Federal Government of Nigeria, the thirty-six state governments, and the Federal Capital Territory.
The $15.9 billion Eurobond is the foreign component of the debt Nigeria owes – there are concerns about the increasing accumulation of Eurobonds in the external debt component.
According to economists, Eurobonds may likely hurt the Nigerian economy due to high-interest costs, with the associated exchange rate.
However, on its website, DMO said the country’s major concern is revenue generation.
It said that successive Debt Management Strategies had always indicated that the Federal Government’s preferred source of borrowing was concessional sources rather than commercial sources like Eurobonds.
“For instance, one of the objectives of the Debt Management Strategy 2020-2023 is maximizing funds available to Nigeria from multilateral and bilateral sources in order to access cheaper and long-tenured funds,” it said.
It said that it was an indication that the authorities took cognizance of the limited funding envelopes available to the country due to its classification as a “Lower-Middle-Income country”.
“Given the size of new borrowings in the annual budgets over the years, it will not have been proper for the Federal Government to raise all the funds from the domestic market.
“That will result in the government crowding the private sector and raising borrowing rates. Consequently, some part of the required funding has to be raised externally,” it said.
The DMO said that concessional loans, though relatively cheaper, were limited in amount and were not available for financing infrastructure and other capital projects.
“Thus, Nigeria accesses concessional and semi-concessional loans as may be available, while issuing Eurobonds to part-fiance the annual budgets and the infrastructure projects contained therein, ” it said.
