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DMO Advises FG Against Excessive Borrowing


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Nigeria’s Debt Management Office, DMO, has said that the maximum amount of money the country can comfortably borrow in 2017 is $22.08 billion, as anything more will violate the country-specific threshold.

This was part of recommendations contained in the 2016 Debt Sustainability Analysis, DSA, report, released by the DMO and made available to journalists.

The recommendation is coming after President Muhammadu Buhari sent a letter to the National Assembly requesting to borrow almost $30 million between 2016 and 2018.

“The maximum amount that can be borrowed (domestic and external) by the Federal Government of Nigeria in 2017, without violating the country-specific threshold, will be $22.08 billion (i.e. 5.89 per cent of 374.95 billion dollars),” the DMO report read.

“The Debt Management Strategy, 2016-2019 provides for the rebalancing of the debt portfolio from its composition of 84:16 as at the end of December, 2015 to an optimal composition of 60:40 by the end of December, 2019 for domestic to external debts, respectively,” it added.

The DMO said it hoped to achieve this by substituting the relatively expensive domestic borrowing in favour of cheaper external financing.

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“This policy stance has been reinforced by the recent deterioration in macroeconomic variables, particularly with respect to the rising cost of domestic borrowing,” the report read further.

“Hence, the shift of emphasis to external borrowing would help to reduce debt service burden in the short to medium-term and further create more borrowing space for the private sector in the domestic market.

The DMO also clarified that the recommendation was made, taking into account the absorptive capacity of the domestic debt market and the options available in the external market.

Nigeria’s total debt profile has risen by 30% to $62 billion in 2014, up from $47.6 billion as at September 2013.

The country’s external debt stood at $9.52 billion, 15 per cent of the entire debt stock.
Domestic borrowing, however, accounted for bulk of the total money owed by Africa’s largest economy.

On Tuesday, President Buhari wrote the House of Representatives seeking approval for an external borrowing of $29.960 billion.

The President said the loan was needed to execute important projects across the 36 states of the federation and the Federal Capital territory.

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“The projects cut across all sectors with special emphasis on infrastructure, agriculture, health, education, water supply, growth and employment generation, poverty reduction through social safety net programmes and governance and Financial management reforms among others,” the letter read.



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