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DMO confirms $4bn approved external borrowing realised

The Director-General, Debt Management Office (DMO), Ms. Patience Oniha has confirmed that $4 billion out of the $6.18 billion approved for external borrowing in the 2021 budget has been realised. Disclosing this in Abuja on Monday, she said: “For the external borrowing, which is about $6.18 billion, we raised $4 billion in September.

 

We did have what you will call demand, which is  same thing as order book or subscription of over $12 billion, but the advisers said to us, let’s drop the interest rate a bit and see how much we get and also $6 billion at once is huge.

 

“You know after you issue, then there’s a secondary market where they are traded, so we dropped the rate a bit and we still had demand of over $9 billion, but $4 billion was a good size to issue at once so that it doesn’t become such a surplus in the market that the price will not be very good both for the sovereign and for other borrowers.

 

“So for the remaining $2.18 billion, we are working with the transaction advisers and monitoring the market. If we think the market is good and our supervisors say we should raise that money, we will. But our options are on the table for the borrowing sources. We’ve done quite a lot to fund the 2020 budget.”

 

The occasion was a Workshop on “Understanding Nigeria’s Public Debt Management,” organised for the Secretariats of the Senate Committee on Local & Foreign Debts and House Committee on Aids, Loans & Debt Management, in Zuba, near Abuja.

 

Similarly, the DMO boss said that provision of $15. 668 billion external borrowing in the budget buoy local currency- naira exchange rate.

 

The sum raised via external borrowings between January 2011 and September 2021, she noted strengthened the nation’s foreign reserves, thereby firming up that nation’s currency at the foreign exchange market. Oniha explained that there was more to external borrowings than just raising funds to finance budget deficits.

 

“The DMO’s activities are not limited to domestic financial markets. It may please you to note that the DMO has raised over $15.368 billion through Eurobonds and a $300 million Diaspora Bond to finance budget deficits and various projects.

 

“Through these securities issuance in the international capital markets, the sources of funding for the Federal Government has expanded while, it created opportunities for Nigerian corporates including banks to raise capital abroad. Perhaps, even more important, the proceeds of Eurobonds issued, increased Nigeria’s External Reserves thereby supporting the naira exchange rate.”

 

The new borrowings are undertaken in compliance with legislations and public debt is managed in accordance with international best practice and that Debt is serviced in a timely manner.

 

In the case of the later, the DMO undertakes an annual Debt Sustainability Analysis and is guided by a Medium Term Debt Management Strategy which is prepared every four years.

On the 2021 domestic borrowing, the D-G disclosed that about 90 per cent of it has already been achieved through various securities. “As you know, for the domestic borrowing for this year, we have about N3.145 trillion from both the Appropriation Act and the supplementary. “As you probably know already, we will raise between N200 billion and N250 billion Sukuk, so what is outstanding is about N345 billion.

 

“So we have raised about N2.8 trillion, what is remaining is about N350 billion. We’ll do a sukuk, possibly within two weeks, the remaining we would raise form an FGN bond auction in December, we still have one more month to go. So we are almost there.”

 

On debt sustainability analysis, she said nation’s debt latest sustainability analysis showed a 21.61 per cent Debt-to-GDP ratio, much less than the 40 per cent limit set by the nation for itself and the 55 per cent recommended by the World bank.

 

She said, however, that the nation had to pay more attention to the revenue, as, according to her, “we use revenue to service debt. “Our Debt-to-GDP is low, about 21.61 per cent now. The limit we put for Nigeria is 40 per cent, as a country, but the World Bank recommends up to 55 per cent.”

 

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