DMO plans raise N745bn through Bonds, Sukuk, Savings Bonds and Green Bonds to finance Budget Deficit 2020

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The DMO also unveiled its plans for the year 2020, based on the New Borrowings in the 2020 Appropriation Acts, which comprises of N850 billon and N744.99 billion for External and Domestic Borrowings respectively.

The Debt Management Office (DMO) at a series of Interactive Sessions presented a review of activities and its plans for raising capital from domestic and external sources in the year 2020. The Sessions involved banks and institutional investors in the Federal Government of Nigeria (FGN) securities amongst which were Pension Funds Administrators (PFA), Insurance Companies, Fund and Asset Managers. A similar Interactive Session was held with the media on January 17, 2020.

 

In the statement released by DMO noted that at the Interactive Sessions which held in Lagos and Abuja, the DMO stated amongst others, that the level of New Borrowings in the Appropriation Acts declined consistently since Nigeria exited the recession in the year 2017.It also reiterated the fact that the increase in the New Borrowings in the Appropriations Acts between 2015 and 2017 was due to the need to stimulate growth and create jobs in the economy as contained in the Economic Recovery Growth Plan (ERGP).

 

The Presentation by the DMO at the Interactive Sessions showed that the 2020, the new domestic borrowing of N744.99Bn will be raised primarily through FGN Bonds and Sukuk.

 

“The New Domestic Borrowings will be raised through FGN Bonds, Sukuk, FGN savings Bonds and possibly Green Bonds. While External Borrowings the strategy is to first seek out concessionary and semi concessionary loans due to the lower interest rate and longer tenors. Any shortfall thereafter may be raised from commercial sources.”

 

Key Highlights

 

The director general disclosed that Government committed to delivering the goals of the Economic Recovery and Growth Plan, including infrastructure development

 

Also it showed improved Efficiency in spending as some part of the borrowings is tied to specific projects.

− Creating Jobs

− providing infrastructure for economic activities

− Boosting growth in the Gross Domestic Product.

 

 

DG noted that New Borrowing in 2020 as it regards External stood at N850 billion that will be largely through Concessional which is cheaper, help reduce Debt Service Cost, longer-term funds for infrastructure, also use to create space for private sector borrowing and increase External Reserves.

 

According to the statement, the objectives of the Debt Management Strategy (2016 – 2019) are to ensure that the Public Debt is sustainable and borrowing is done in a prudent, least cost basis and focused on increasing the external component of the Debt Portfolio to moderate the Debt Service Costs and elongate the tenor of the portfolio. According to her it was achieved through the reduction in the issuance of new short-dated instruments in the domestic debt market, and to first maximise the available funding from the concessional sources through the Multilateral and Bilateral creditors, thereafter, any balance may then be sourced from the commercial sources, such as the issuance of securities in the International Capital Market

 

 

“Nigeria has run Budget Deficits for decades, which have been primarily financed by new borrowings; this together with subnational borrowings has led to a growth in the debt stock.

“The relatively high level of new borrowing in recent years was triggered by the economic downturn which required increased government spending. A higher level of borrowing was included in the ERGP as a strategic tool for stimulating growth, job creation and increasing external reserve.

 

 

“As part of the debt management strategy of growing and developing the securities market, three new products namely Sukuk, Green Bonds and FGN Savings Bonds were introduced in 2017

 

 

 


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