DMO boss exposes the import of new debt management strategy
The Federal Government has introduced a new debt management strategy expected to be in operation from 2016 to 2019. It is targeted at a marginal increase in external borrowing and increased commitment to capital projects execution.
According to a press statement from Debt Management Office (DMO) its Director General, Dr. Abraham Nwankwo, who disclosed the three-year debt management strategy in Abuja on Monday reveals the targets of the strategy.
Nwankwo was quoted in the statement to have said that the new debt management strategy approved by the Federal Executive Council last Wednesday is aimed at economy recovery and diversification.
He explained that the focus of the new initiative was to develop a debt management strategy that would ensure that in the face of macroeconomic and other financial constraints, the cost and risk profile of the public debt portfolio remains within acceptable limit over time.
He reiterated that that the strategy was in line with President Muhammadu Buhari’s vision to generate maximum employment, reduce poverty and increase the living standard of Nigerians, stressing that for this to be effectively achieved, the government was making positive efforts in diversifying the economy as against the backdrop of structural collapse in oil prices and oil revenue.
According to DMO boss, “The Debt Management Strategy we are going to pursue over the next four years, takes into account the fact that for now Nigeria’s public debt portfolio is dominated by domestic debt. After the Paris and London Club exits between 2004 and 2006, the country took a deliberate decision to develop its domestic bond market and to do most of the public borrowing from domestic sources so as to develop the domestic bond market, that objective has been sufficiently achieved.
“And therefore taking into account that external financing sources are on the average cheaper than domestic sources, it becomes more necessary to slant more of the borrowing in favour of external sources.
“Therefore one of the major elements of this strategy is that over the medium, term we will strive to remix the public debt portfolio from 84 per cent domestic and 16 per cent external to 60 per cent domestic and 40 per cent external.
“In addition taking into account other factors, the fact that over the next four years public borrowing proceeds will be devoted to capital expenditure an element of the strategy is to ensure that we remix the current status of about 31 per cent short-term and 69 per cent long-term to a maximum of short-term 25 per cent and the minimum of long-term 75 per cent. So we are remixing between external and domestic and we are also remixing within the domestic, between short and long-term.” He concluded.
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