External debt hits $4.5bn, domestic N4.5 trillion

2011-05-10
VANGUARD Newspaper- Emma Ujah

ABUJA — THE Debt Management Office, DMO, said, yesterday, that the nation’s external debt portfolio at the end of 2010 stood at about $ 4.5 billion, with the domestic debt at N4.5 trillion.

Director-General of DMO, Dr. Abraham Nwankwo, who disclosed this at the 2011 Debt Sustainability Analysis, DAS, workshop in Abuja said, however, that the nation’s debt position was still sustainable, as according to him, the debt/GDP ratio was about 18 per cent .

Nwankwo said: “Let me not talk about the provisional figure for the first quarter of 2011. Finalized figure for the last figures of 2010 stood at N4.5 trillion for the domestic, while the figure for external debt was about $4.5 billion. When you combine these two, you would have a Debt/GDP ratio of about 18 per cent.”

The D-G added that the Federal Government had set for itself, a debt/GDP ratio limit of not be more than 25 per cent up to 2015.
He said the workshop was to provide officials of the organization and their counterparts from the Ministry of Finance, Central Bank of Nigeria, and the National Planning Commission an opportunity to review the past and present conditions under which the loans were taken and to advise the Federal Government on future borrowings.

Debt sustainability

His words: “The essence of this Debt Sustainability Analysis which we are conducting is to ensure that we review existing conditions because conditions have changed. Conditions are dynamic so we are going to include all the changes that have taken place and that are expected to take place in the next one two years and see what the outlook will be like. That will enable us to have the basis on which to advise the government on how to maneuovre the challenges and still maintain the sustainability of its debt.”

On criticisms of government borrowing even in the face of rising oil revenue, Nwankwo said the establishment of the Sovereign Wealth Fund, SWF, was the best way to manage the excess oil income with a view to maximizing current oil revenue for both present and future generations.

He said: “The SWF is to be funded partially from oil revenue. When you look at it from a long-term perspective, it is not adequate to say you are earning so much money now, therefore, you should not borrow so that you use the money that you have now. To say so is that you are thinking short-term.

Stabilisation

“The important thing is that government has programmed an organised and structured way of using oil revenue in the future and that is why we have the SWF as you know. So that every money that comes, you have a component of it for the future generation; a component of it for stabilization purpose and a component of it for wealth creation-money that can be put into infrastructure and you can see the value over time.

“Even if oil prices go higher than what they are now and you take all the revenue, thinking in terms of medium to long-term, that is not enough for you to exploit your natural resources, to produce the type of transformation you need over the next five to seven years. So it has to be a combination of both. The important thing is that you should make efficient, effective and prudent use of the your own resources as well as borrowed resources.”

The DMO boss also advocated a government guarantee for private sector borrowing for investment in infrastructure which, ordinarily should have been the responsibility of the public sector.

He noted: “In the last four or five years, government has developed the domestic bond market so that the private sector can now borrow for long term projects.”

Externally, government has made the debut of an internal capital market to set the bench-mark so that the Nigerian private sector can also borrow effectively at very good conditions to fund growth and development back at home.

“Government appreciates that beyond that, it needs to take pro-active step to make the private sector a substitute for the public sector in terms of expenditure in major critical priority projects. Because government does not want its debt portfolio to go beyond unsustainable limits, yet it must ensure capital flow for the development, exploitation and processing of our natural resources.

“Government would have to, in the short to medium term, possibly provide some form of guarantee so that private sector could be encouraged to be the agents sourcing for money- whether in terms of equity or credit for national development”.

 

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