Nigeria’s total public debt stock, comprising the Federal Government, states and Federal Capital Territory (FCT), stood at N20.373 trillion as at September 30, 2017, showing a marginal increase of 3.6 per cent from the N9.637 trillion as at June 30, 2017. A breakdown of the debt stock shows that domestic debt accounted for 76.96 per cent, while external debt accounted for 23.04 per cent.
Specifically, domestic debt stock was N15.679 trillion, showing an increase of 4.1 per cent compared to N15.034 trillion as at June 30, 3017. On the other hand, external debt stock stood at N4.694 trillion, a marginal rise of 1.9 per cent above the N4.602 trillion figure as at June 30, 2017.
These debt data lends credence to the government’s claims that the public debt stock is skewed in favour of domestic debt, which is partly responsible for the high debt service figures. It is against this background that analysts have commended the government on its strategy of introducing lower cost external debt into the debt stock to reduce debt service costs. For this purpose, the government is making arrangements to raise external funds of $5.5 billion. The amount, which comprises $2.5 billion new borrowing to partly finance the N2.322 trillion deficit in the 2017 Appropriation Act and $3 billion to repay maturing domestic debt, is expected to achieve a reduction in interest costs of about N75 billion and N91 billion respectively.
when compared to the interest cost of borrowing in naira in the domestic market. The strategy will also contribute to attaining the target ratio of 60:40 between domestic and external debt.
According to the Debt Management Office (DMO), other benefits of this strategy include increased availability of funds to the private sector and lower domestic lending rates both of which will enable the private sector contribute to growth, as well as higher level of external reserves to support the naira exchange rate.