Adedapo Adesanya
By Adedapo Adesanya
Nigeria’s debt profile will rise to more than N95 trillion as the Senate approved a request from President Bola Tinubu to securitise N7.5 trillion in overdrafts from the Central Bank of Nigeria (CBN) to longer-dated bonds that will be added to the country’s debt.
The Senate approved the conversion at a sitting on Saturday, December 30 during which they also endorsed a 2024 budget of N28.77 trillion, which is N1.27 trillion or 4.6 per cent higher than the N27.5 trillion figure proposed initially by Mr Tinubu.
The Debt Management Office (DMO) had said Nigeria’s total public debt as of September 30, 2023, was N87.91 trillion or $114.35 billion.
The DMO, in a statement in December, stated that the amount represented domestic and external debts of the Federal Government, the 36 state governments, and the Federal Capital Territory, Abuja, explaining that the debt stock represented a marginal increase of 0.61 per cent when compared to the June 30, 2023 figure of N87.38 trillion.
“This trend is explained by the decrease in External Debt from $43.16 Billion as at June 30, 2023, to $41.59 Billion as at September 30, 2023, and a relatively moderate increase of N1.80 trillion in Domestic Debt,” the DMO statement partly read.
“External Debt decreased due to the redemption of a $500 million Eurobond and the payment of USD413.859 million as the first principal repayment of the $3.4 Billion Loan obtained from the International Monetary Fund in 2020 during COVID-19.
“The servicing of these Debts in addition to other Debts, are clear demonstrations of the FGN’s commitment to honouring its debt obligations. Notwithstanding, Mr President’s initiatives and actions towards revenue generation remain important for Nigeria’s overall fiscal balance,” the debt office added.
President Tinubu said the new conversion will reduce the cost of servicing the debt to 9 per cent when compared to the monetary policy rate plus 3 per cent that it currently attracts, and also improve the transparency of liabilities owed to the banking regulator.
“The securitization of the Ways and Means will lead to the realisation of the following benefits among others.
“Reduction of debt service costs as the interest rate for the securitised ways and means is lowered at nine per cent compared to three per cent previously adopted.
“The savings arising from the much lower interest rate will help to reduce the deficit in the budget and improvement in debt transparency as securitised ways and means advances are included in the public debts statistics,” he wrote to the Senate.
Mr Tinubu is following in the footsteps of his predecessor, Mr Muhammadu Buhari, under whose administration in May 2023, lawmakers approved the conversion of N22.7 trillion in loans from the central bank into bonds.
