Buhari Increases Nigeria’s External Debt By 113.94%

By Ikenga Chronicles July 10, 2018

The Federal Government and the 36 states of the federation, have indebted the country with an external loan of $22.07bn as at March 2018 from $10.07 in June 2015. This represents an increase in debt of about $11.76bn or 113.94 percent within 33 months after President Muhammadu Buhari took over government.

Also, statistics obtained from the Debt Management Office (DMO) in Abuja on Monday by Punch, showed that the country’s external loans rose from N2.03tn as of June 31,2015 to N6.75tn as of March 31, 2018, an increase of 232.51 percent.

Meanwhile, the domestic debt of the country rose from N10.09tn as of June 2015 to N15.96tn as of March 2018. This reflects an increase of N5. 87tn or 58.23 percent within the period under review.

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The increasing percentage of the external loans is a reflection of the country’s current debt management strategy, which targets to raise the debt ratio to 40 percent external and 60 percent local.

As of June 2015, the ratio stood at 16.77 percent for external and 83.23 percent for domestic. As of March 2018, it stood at 27.71 per cent external and 72.29 percent domestic. Currently, there are ongoing foreign loans deals and negotiations that can bring the nation nearer to the 40 percent target.

The country’s Debt Management Strategy 2016–2019 made a case for an increase in external financing with a view to rebalancing the public debt portfolio in favour of long-term external financing in order to reduce the debt service cost and lengthen the maturity profile, Punch reports.

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In the document, the DMO stated, “To achieve a significant reduction in cost would require that the government accesses relatively cheaper long-term external financing in such a way that it first maximises the available funds from the concessional and semi-concessional sources, taking into account what may be readily available within a given period, after which other external sources would be accessed.

“Further lengthening of the maturity profile of the domestic debt portfolio through reduction in the issuance of new short – dated debt instruments or refinancing of maturing NTBs with external financing or both.

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“Although the impact on cost of the introduction of new debt instruments into the domestic debt market is expected to be relatively small, the impact on maturity profile of total domestic debt could be significant; hence , reducing the risk of bunching, roll – over risk, and the associated debt servicing costs.”

The Federal Government had in 2017 borrowed from the international capital market to refinance $3bn maturing domestic debts as part of its overall debt management strategy of reducing debt service costs.

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