FG approves new Debt Management Strategy
AREWA AGENDA- The federal government has approved a new Medium-Term Debt Management Strategy (MTDS) which has increased total public debt as a percentage of Gross Domestic Product from 25 per to 40 percent.
The Federal Executive Council (FEC), approved the new Medium-Term Debt Management Strategy, yesterday. It will run in period of 2020-2023.
A statement by Debt Management Office (DMO) said that the new fiscal sustainability of the target would enable it accommodate borrowings to fund budget deficits and other government obligations. In that regard, the DMO said that the government would issue promisory notes to settle government arrears and the Ways and Means Advance at the Central Bank of Nigeria.
Under the new strategy, domestic borrowing is targeted at 70 per cent, while external borrowing would be 30 per cent and optimise access to both concessional and commercial sources abroad
An average tenor or 10 years is being targeted so as to more effectively manage the refinancing risks.
According to the DMO, “The Medium-Term Debt Management Strategy (MTDS) is a policy document that provides a guide to the borrowing activities of government in the medium-term, usually four (4) years.
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“It is recognized as one of the best practices in public debt management and is recommended by the World Bank (WB) and International Monetary Fund (IMF) to ensure that public debt management is driven by a well-articulated Strategy that is structured to meet a country’s broader macroeconomic and public debt management objectives.
“The MTDS, 2020-2023 has been prepared by the Debt Management Office (DMO), in collaboration with relevant stakeholders (Federal Ministry of Finance, Budget and National Planning, Central Bank of Nigeria, Budget Office of the Federation, National Bureau of Statistics and the Office of the Accountant-General of the Federation).”
Nigeria has had two (2) Medium Term Debt Management Strategies (2012-2015 and 2016-2019), prior to the current Strategy.
The agency said “The new Strategy had to be re-worked to reflect the global and local economic impact of the COVID-19 Pandemic and incorporates data from the revised 2020 Appropriation Act and the Medium-Term Expenditure Framework 2021-2023.
“Thus, the new MTDS adequately reflects the current economic realities and the projected trends.
“The preparation of the MTDS usually involves the consideration of alternative funding strategies available to Government, as it seeks to meet its financing needs, taking into consideration the cost of borrowing and the associated risks, while ensuring debt sustainability in the medium to long term.”
By Emma Ujah
Arewa Agenda is a publication of young writers and journalists from Northern Nigeria geared towards peaceful coexistence and national development through positive narratives.
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