FG approves new debt management strategy

• Debt to GDP now 40%

The Federal  Government has approved a new Medium-Term Debt Management Strategy (MTDS) which has raised the total public debt as a percentage of Gross Domestic Product from 25 per to 40 per cent.

The Federal Executive Council (FEC) granted the approval on Wednesday at its meeting, adding that the new strategy would run in period of 2020-2023.

A statement by Debt Management Office (DMO) said that the new fiscal sustainability of the target would enable it to accommodate borrowings to fund budget deficits and other government obligations.

The DMO said that the government would issue promissory notes to settle government arrears and the Ways and Means Advance at the Central Bank of Nigeria.

Under the new strategy, domestic borrowing is targeted at 70 per cent, while external borrowing would be 30 per cent and optimise access to both concessional and commercial sources abroad.

An average tenor or 10 years is being targeted so as to ensure more effective management of the refinancing risks.

The DMO said, “The Medium-Term Debt Management Strategy (MTDS) is a policy document that provides a guide to the borrowing activities of government in the medium-term, usually four (4) years.

“It is recognised as one of the best practices in public debt management and is recommended by the World Bank (WB) and International Monetary Fund (IMF) to ensure that public debt management is driven by a well-articulated strategy that is structured to meet a country’s broader macroeconomic and public debt management objectives.

“The MTDS, 2020-2023 has been prepared by the Debt Management Office (DMO), in collaboration with relevant stakeholders (Federal Ministry of Finance, Budget and National Planning, Central Bank of Nigeria, Budget Office of the Federation, National Bureau of Statistics and the Office of the Accountant-General of the Federation).”

The new strategy, it said, “had to be re-worked to reflect the global and local economic impact of the COVID-19 pandemic and incorporates data from the revised 2020 Appropriation Act and the Medium-Term Expenditure Framework 2021-2023. Thus, the new MTDS adequately reflects the current economic realities and the projected trends.”