New Telegraph

DMO: Why FG prefers Eurobond to domestic borrowing for budget funding

The Debt Management Office (DMO) has offered reasons for the Federal Government’s preference for raising parts of her borrowing for budget funding via Eurobond.

It said that given the size of new borrowings in the annual budgets over the years, it would not have been proper for the Federal Government of Nigeria (FGN) to raise all the funds from the domestic market, as according to DMO, doing that, would result in the government crowding out the private sector and raising borrowing rates.

The Debt agency stated this on Wednesday against the backdrop of a statement allegedly made by a member of the Monetary Policy Committee of the Central Bank of Nigeria that the Federal Government’s appetite for Eurobond borrowing may move it into debt distress.

The agency stated that the statement may have been made without due consideration of the government’s borrowing needs as captured in the annual budgets, Medium-Term Expenditure Framework, as well as, the Debt Management Strategy.

Explaining further, the DMO stated that the borrowing needs are derived from the annual budgets while the borrowing mix is based on the subsisting Debt Management Strategy.

“Successive Debt Management Strategies have often indicated that the Federal Government of Nigeria’s (FGN) preferred source of external borrowing is concessional sources rather than commercial sources such as 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, whilst taking cognizance of the limited funding envelopes available to Nigeria, due to Nigeria’s classification as Lower-Middle-income country,’” it said.

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