Nigeria’s debt hit N22trn as Buhari reduces domestic borrowing

Nigeria is reducing its domestic borrowing after government debt reached N22 trillion in 2017, with most of it made up of high-interest, locally-acquired credit, the country’s debt office said.

The government is working on a strategy to reduce domestic debt to 60 percent of the total, from 73 percent, Patience Oniha, Director-General of the Abuja-based Debt Management Office, told reporters on Wednesday.

“The key benefits of the restructuring of the portfolio are the reduction of the government’s debt-service costs, lowering of interest rates in the domestic market and improved availability of credit facilities to the private sector,” Oniha said in the capital, Abuja.

Africa’s top oil producer was compelled to increase borrowing as the output and price of crude, the country’s main export, plunged from 2014, with the government losing half of its revenue, she said. As Nigeria fell into its worst economic slump in a quarter of a century, President Muhammadu Buhari sought to stimulate the economy by increasing spending.

In 2017 Nigeria spent N1.6 trillion out of a budget of N7.2 trillion on servicing debt, with only 9 percent of that for external borrowing and the rest spent on local loans, according to the debt office. The DMO repaid N198 billion of maturing domestic debt at the end of last year with the proceeds of its Eurobond sales to rein in the increasing cost of credit, Oniha said.

At 18.2 percent of gross domestic product, Nigeria’s public debt remains sustainable, she said.

“Our projection is that from two sources, the borrowing should be dropping in the medium term,” she said. “The rate of increase will be much slower, and instead of borrowing 17-18 percent from the domestic market, we’ll do 7 percent from external sources.”