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Nigeria’s New Debt Strategy to Focus on Longer Tenor Domestic Borrowings

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The Federal Executive Council (FEC) at its meeting yesterday February 10, 2021, approved a new Medium-Term Debt Management Strategy for Nigeria, for the period 2020-2023, with a particular focus on longer tenor domestic borrowings.

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

Nigeria’s 2020-2023 MTDS can be summarized as follows:

“Borrowing will be from domestic and external sources but a larger proportion of new borrowing will be from domestic sources using long-term instruments while for External Borrowing, concessional funding from multilateral and bilateral sources will be prioritised,” the Debt Management office (DMO), said in a statement.

The targeted total public debt as a percentage of GDP in the new MTDS has been Increased to 40 percent from 25 percent in order to: accommodate new borrowings to fund Budget Deficits and other obligations of Government; Promissory Notes to be issued to settle Government Arrears; and, the Ways and Means Advance at the Central Bank of Nigeria.

The domestic versus external debt mix is forecast at 70 percent to 30 percent, which the DMO said will help to further strengthen the domestic debt market and optimize access to both Concessional and Commercial sources of funding.

Meanwhile the average tenor of Debt Portfolio is a minimum of 10 years to help sustain the issuance of longer-tenored instruments, in order to effectively manage refinancing risks.

The MTDS, 2020-2023 was 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).

Nigeria has had two Medium Term Debt Management Strategies (2012-2015 and 2016-2019), prior to the current Strategy.

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