Tuesday, 8 October 2013

Domestic debt profile rises by N238bn
Total domestic debt of the 36 states of the federation and the FCT has been put at N1.471 trillion in 2012.
This is against the N1.233 trillion debt profile in the preceding year, thus showing an increase of N238 billion or 19.34 per cent.
This was contained in the 2013 Report of the Annual National Debt Sustainability Analysis (DSA) of the Debt Management Office (DMO).
The increase, according to the report, was an accumulation of arrears and new issuance of bonds in the capital market by some state governments.
Also, the Federal Government of Nigeria’s (FGN) securitised total domestic debt outstanding amounted to N6.537 trillion as at the end of December 2012 compared to N5.622 trillion as at December 2011.
This is indicative of an increase of 16.27 per cent. Of the amount, FGN bonds accounted for N4.080 trillion or 62.41 per cent, the Nigerian Treasury Bills (NTBs) was N2.122 trillion or 32.47 per cent, while treasury bonds accounted for the balance of N334.56 billion of 5.12 per cent. The rise is based on the figures in the report, it is based on the rising government’s expenditure due to increase in public wages bills, overheads and other recurrent expenditures, resulting to huge budget deficits, which were required to be funded through domestic borrowing.
The total domestic debt service as at end of December 2012 stood at N720.549 billion indicating an increase of 34.08 per cent over the level in 2011.
Similarly, the total domestic debt service as a percentage of the total domestic debt stock outstanding was 11.02 per cent in 2012, which was higher than the 9.56 per cent recorded in 2011.
The significant rise in 2011 and 2012 was due to the increase in the cost of borrowing occasioned by the contraction in monetary policy regime, particularly the upward review of the benchmark Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) in 2011 from 6.25 to 12 per cent, the MPR remained unchanged in 2012 at 12 per cent.
Equally, the total external debt service was $293 million in 2012 and was lower than the $351.61 million paid in 2011 by $58.61 million or 16.67 per cent.
Trends in Nigeria’s external debt stock over the five-year period ending 2012 showed a gradual increase with the highest annual increment of 24 per cent occurring in 2011 due to the issuance of the $500 million Eurobond.
To ensure efficient utilisation of borrowed funds, the DMO opined that efforts should be aimed at ensuring that all new borrowings should be project-tied and should be sustained and such projects should have significant multiplier effects that would provide long-term benefits for the economy.
“As a way of reducing public sector expenditure and the rate of debt accumulation, government should sustain the policy measures aimed at sensitising the private sector to lead investment in the critical sectors of the economy and development of infrastructure.
“The current policy thrust of using sinking fund as a means of redeeming maturing obligations, which was introduced in 2012 should be sustained. The authorities should also consider increasing the amount being set aside, in view of the quantum of maturing obligations (FGN bonds, Eurobonds), which require bullet redemption in the near to medium term,” the document maintained.visit sun news


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