Nigeria’s federal government will for the first time issue 30-year tenored bonds in 2019, given the relatively low interest rates compared with 2017 levels of over 18 percent, the Debt Management Office (DMO) has announced.
The debt office said on Thursday that the bonds issuance will meet the needs of annuity funds and other long term investors while also developing the domestic capital market and reducing the re-financing risk of the federal government.
“It will enable Government raise long-term capital for Infrastructure, serve as benchmark for Private sector raising of long-term investment capital, reduce short-term Debt, as well as help deepen the Life Insurance sector in particular,” Patience Oniha, Director General at the Debt Management Office said in Abuja while giving updates on the country’s debt status.
This comes as the country hopes to achieve a 50-50 balance in its domestic to foreign borrowings this year as it moves ahead with its strategy of borrowing cheaper long term money from external sources more than locally.
About N1.648 trillion has been penciled as new borrowings in 2019 – though subject to National Assembly approval – to partly fund the budget.
According to the DMO boss, N824billion would be sourced locally through FGN Bonds, Sukuk, Green Bond , as well as Savings Bonds while another N824billion would be external, comprising largely concessional loans in order to achieve the 50-50 mix.
“The external loans will be Cheaper and will help reduce Debt Service Cost, Longer-term funds for infrastructure, will Create space for private sector borrowing and increase External Reserves,” she explained.
Total Public Debt stood at N24.387 trillion or $79.437 billion as at December 31, 2018 representing a year-on-year growth of 12.25%, according to latest figures from the DMO.
Domestic debt stock dropped to 68.18 percent in 2018 from 73.36 percent the previous year, as against foreign debt at 31.82 percent, Oniha said.
DMO’s 2013-2019 debt strategy is to achieve a Debt Stock mix of 60% for Domestic and 40% for external.
Oniha said the DMO new strategy of deploying relatively cheaper and long tenored external funds was achieving the objectives which include; to create more space for other borrowers in the domestic market, extend the average tenor of the debt stock in order to reduce refinancing risk and increase external reserves.
The new debt strategy led to an injection of N855 billion through the redemption of Nigerian Treasury Bills in 2018 and a general drop in the federal government’s borrowing rate in the domestic market from over 18% per annum in 2017 to 14 – 15% per annum in 2018.
She explained that the FGN’s Domestic Debt Stock includes N331.12 billion Promissory Notes issued to Oil Marketing Companies and State Governments in December 2018.
BusinessDay was told that a second tranche of N15bn green bonds would be issued by the second quarter of this year.
Oniha also noted that some of DMO major plans in 2019 are to undertake more of project-tied borrowing and access more external borrowing from Concessional Sources.
Another area of focus will be the management of Risks associated with the Debt Stock to mitigate Debt Service Costs, she added.
Onyinye Nwachukwu
