By Modupe Gbadeyanka
Market operators have received, with excitement, news of the Debt Management Office (DMO) disclosing that it would redeem maturing treasury bills worth N198.032 billion this week and next week.
On Thursday, December 14, 2017, N131.415 billion worth of Nigerian Treasury Bills (NTBs) will mature, while on Thursday, December 21, 2017, another NTBs valued at N66.617 billion will also mature.
But the debt office has disclosed that it would redeem these maturing bills in full as at when due instead of the usual practice of rolling over NTBs at maturity.
These payments, according to the DMO, are aimed to help the private sector have to access funds and possibly at a lower cost than was hitherto possible.
However, the DMO said it expects operators in the market to use this opportunity to develop the other segments of the debt capital market such as corporate bonds.
The debt office noted that the NTBs would be redeemed primarily using proceeds of the $500 million raised through a Eurobond Issuance by Nigeria in November 2017.
Nigeria had issued a dual-tranche $3 billion Eurobond in November 2017 out of which $2.5 billion is to part-finance the deficit in 2017 Appropriation Act and the balance of $500 million is for the refinancing of domestic debt.
Recently, Federal Government said it was planning to refinance some maturing domestic debt with external borrowing as part of its overall debt management strategy of reducing debt service costs.
Other objectives of this strategy are to free up space in the domestic market for other borrowers and achieve a more sustainable debt portfolio mix of 60 percent domestic and 40 percent external.
In addition, the redemption overtime will help reduce the refinancing risk associated with short-term borrowings through NTBs with tenors of 91, 182 and 365 days.
As at September 30, 2017, NTBs accounted for 30.23 percent of the Federal Government’s domestic debt of N12.5 trillion compared to the DMO’s target of a maximum of 25 percent.
Adedapo Adesanya