Nigeria endorses medium term debt management strategy

FEC-meeting19 May 2013, Abuja — Nigeria’s Federal Executive Council, FEC, on Wednesday in Abuja approved a medium term debt management strategy to address the structure and level of the nation’s domestic and foreign debts.

Dr Yerima Ngama, the Minister of State for Finance, disclosed this while briefing State House correspondents on the outcome of the FEC meeting presided over by President Goodluck Jonathan at the State House.

Ngama said the medium term debt management strategy was designed to address the challenges of growing domestic debt and create space for the private sector to access more credit.

“The strategy was developed jointly by the Debt Management Office, DMO, and the CBN with input from National Bureau of Statistics and the National Planning Commission,” he said.

Ngama said the structure of the nation’s debt was not optimal because 88 per cent of the debt was domestic, while only 12 per cent was foreign.

“We have a total of over N6 trillion worth of debt. However, it is not just the level but the cost of servicing the debt.

“Nigeria has one of the highest interest rates in the developing world and if you have a high level of debt, then debt servicing will become very expensive,” he said.

The minister said that after offsetting the huge foreign debt owed to the Paris and London Clubs, the country had concentrated on developing internal ways of raising resources.

He said the 2010 wage increase for public servants, which made government to raise a N3.6 trillion bond, was one of the reasons for the growth in the domestic debt profile.

“The increase in wages had led to an annual budget deficit of N1 trillion, sourced locally and not covered by the budgets,” Ngama added.

He said Federal Government’s intervention to curtail the impact of the global economic recession was also responsible for the sharp increase in the domestic debt.

The minister recalled that in order to keep the economy afloat during the global crisis, the government added some stimulus spending which was raised internally, adding that this also led to the huge domestic debt.

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