DMO grow FGN’s debt to N15.02trn through treasury bills issue

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DMO: FG amasses N15.02trn treasury bills’ debt

The Federal Government through Debt Management Office (DMO) raked in a total of N15.02 trillion through treasury bills between 2013 and 2017,according to  the DMO’s 2017 Annual Report and Statement of Accounts released a few days ago.

The reports further disclosed that besides, government’s outstanding treasury bills debt as at 2013, 2014 and 2015, stood at N2.58 trillion, N2.82trillion and N2.77 trillion respectively. Interestingly, the debt increased significantly to N3.28 trillion and N3.58 trillion in 2016 and 2017 respectively.

The DMO stated: “The stock of FGN’s Domestic Debt has been on the increase in the past five years from N7,118.97 billion in 2013 to N12,589.49 billion in 2017. This development was largely attributed to the use of domestic debt to fund rising budget deficit and refinancing of maturing domestic debt obligations.”

Moreover, the agency stated: “The composition of the domestic debt portfolio was in line with the country’s Debt Management Strategy of issuing more of longer tenored instruments so as to mitigate refinancing risk. “Further analysis showed that the stock of FGN Bonds and Nigerian Treasury Bills (NTBs) rose from N4,222.03 billion and N2,581.55 billion in 2013 to N8,715.81 billion and N3,579.80 billion in 2017, respectively.

“The stock of Treasury Bonds maintained a downward trend from N315.39 billion in 2013 to N175.99 billion in 2017, as a result of the gradual redemption of the instrument over the years. In 2017, FGN Savings Bond, Sovereign Sukuk and the Green Bond were introduced into the domestic debt market with values of N7.2 billion, N100 billion and N10.69 billion, respectively.”

Specifically, the data shows that the securitised Federal Government’s Domestic Debt Stock outstanding as at December 31, 2017 was N12.59 trillion compared to N11.06 trillion as at December 31, 2016, representing an increase of N1.53 trillion or 13.85 per cent.

A cursory look into the data indicates that the Federal Government’s domestic debt stock as at December 31, 2017, comprised FGN bonds (69.23 per cent), Nigerian Treasury Bills (NTBs) (28.43 per cent) and Treasury Bonds (1.40 per cent). Others are FGN Savings Bond (0.06 per cent), Sovereign Sukuk (0.79 per cent) and Green Bond (0.08 per cent).

Analysis of the figures revealed that the maturity structure of government’s domestic debt as at December 31, 2017, shows that the short-term instruments (less than one year to maturity) in the total domestic debt portfolio accounted for 32.61 per cent, while instruments maturing between one and three years and over three years in the total domestic portfolio were 9.92 per cent and 57.47 per cent, respectively.

The report further pointed out that “the respective shares of 32.61 per cent for short-term maturity helped to increase the share of Total Public Debt maturity within one year with a target set at a maximum of 20 per cent. The strategy of redeeming the maturing NTBs over time help to address refinancing and interest rate risks by further lengthening the maturity profile of the debt portfolio.”

The report pointed out that over the past five years (2013- 2017), the outstanding domestic debt has high proportion of medium to long-term debts, adding that this had helped to reduce refinancing and interest rate risks associated with short-term debts.

Interestingly, the report also shows that the Federal Government’s domestic debt service as at December 31, 2017, was N1.48 trillion compared to N1.23 trillion in the corresponding period of 2016, representing an increase of N247.46 billion or 20.14 per cent.

“This cost comprised principal repayment of N25 billion and interest payment of N1,451.22 billion. By instrument-type, the Debt Service for FGN bonds was 66.57 per cent of the Total Debt Service payment, while payments in respect of the FGN Savings Bond, NTBs, and Treasury Bonds were 0.03, 30.15 and 3.25 per cent, respectively.

“Further analysis showed that the FGN’s Domestic Debt Service payments rose steadily from N794.10 billion in 2013 to N1,476.22 billion in 2017, as a result of the growth in domestic debt stock with relatively higher interest rates,” the report stated.

It would be recalled that as part of its efforts to reduce the debilitating impact of Nigeria’s huge debts, the Federal Government, in August last year, approved the issuance of dollar-backed Treasury bills, even as it extended the maturity period from between 91 and 364 days to two and three years respectively.

Briefing journalists on the initiative, the Minister of Finance, Mrs. Kemi Adeosun, said the Federal Executive Council (FEC) approved a memo restructuring the issuance of treasury bills using dollar instruments subject to the approval of the National Assembly.

Adeosun noted that the extension of the tenor of Treasury bill from the current 91 and 364 days to two and three-year period would provide government with relief from the pressure to repay the debt. The new initiative would reduce government borrowing to $3 billion, make it more convenient for banks to lend to private investors and result in a drop in interest rates, added she.


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