and Minister of Finance, Dr. Ngozi Okonjo-Iweala, Monday released N100 billion for strategic debt management.
It was learnt Monday that N75 billion of the amount is to assist the Debt Management Office (DMO) settle some debt instruments – bonds and treasury bills – that have fallen due while the balance of N25 billion is to kick off the Debt Sinking Fund plan as proposed in the 2013 budget plan. The fund is meant to address from time to time domestic debt instruments that fall due instead of going back to the market to raise funds through refinancing or issue fresh debt notes.
The Senior Special Assistant on Media to Okonjo-Iweala, Mr. Paul Nwabuikwu, confirmed the development to The Guardian. He explained that it was in line with the Federal Government’s resolve to check the domestic debt stock from getting out of control.
He said: “In line with the strong new strategy for managing domestic debt, the Federal Government has concluded plans to immediately pay off N75 billion of bonds which have come due.
“Also, N25 billion has been put in the sinking fund, a special mechanism for accumulating funds for paying off domestic debt. The objective is to get domestic debt within sustainable limits within the shortest possible time.
“The strategy announced last year by Co-ordinating Minister for the Economy and Minister of Finance, Dr. Okonjo-Iweala, was included in the Fiscal Strategy paper for Budget 2013. It has two dimensions.
“The first part of this strategy is to reduce domestic borrowing to sustainable levels. This is already being done. The 2013 budget draft submitted to the National Assembly puts domestic borrowing at N727 billion. Last year, the borrowing was N744 billion, down from N852 billion in 2011. The projection is that by 2015, borrowing will be down to N500 billion which is sustainable.
“The second part is the creation of a sinking fund of N25 billion yearly to accumulate money for paying off bonds, a step which has been taken,” Nwabuikwu further stated.
Meanwhile, the Director-General of the DMO, Dr. Abraham Nwankwo, yesterday welcomed the development, saying it would positively affect the country in a number of ways.
His words: “This is a positive development. The implication is that both for the present and the future, any local debt instrument would be settled instead of going to the market to raise fresh funds. The ultimate aim is that the Federal Government is reducing her domestic debt stock and maintaining it at sustainable level because we don’t want our domestic debt to go out of hand.
“Secondly, this strategy will create more space for the private sector, because as government withdraws from the domestic debt market, it would create more space for the private sector to borrow from the available funds in the market.
“Thirdly, the development is going to force interest rate to come down because there will now be less demand for funds and as a consequence, interest rates are bound to come down.”
