Nigeria to increase borrowing limit in new debt management plan

Nigeria has announced plans to increase long-term loans to finance its budget deficits in the future.

On Wednesday, the Debt Management Office released the federal government’s Medium-Term Debt Management Strategy on its website, seeking to increase total public debt as a percentage of gross domestic product from 25 per cent to a maximum of 40 per cent.

“The 40 per cent ratio is still well below the World Bank, and International Monetary Fund recommended threshold of 55 per cent for countries in Nigeria’s peer group,” the statement said.

The strategy indicated that domestic sources would constitute a larger proportion of the new loans via long-term instruments, while priority is expected to go to foreign and concessional funding from multilateral and bilateral sources.

According to the statement, the debt strategy is to account for 2020 to the end of 2023.

The statement also stated that the government intended to continue with the Ways and Means Advances from the Central Bank of Nigeria.

This means the apex bank will continue to print money to enable the government to plug its budget deficits, despite warnings from the IMF to stop financing the budget deficits to check inflation rates.

The warning was contained in the IMF Article IV Consultation with Nigeria, released on Tuesday, where the organisation recommended establishing a unified exchange and removing the backlog of foreign exchange requests.

The IMF said Nigeria’s long-running policy of a stable exchange rate produced limited benefits.