Africa’s biggest economy is looking to reduce domestic borrowing as debt stands at $61 billion

Nigeria’s government is planing to prune local borrowing by 13% to 60% of the total from 73%, said the Director-General (DG) of the country’s Debt Management office on Wednesday. Encompassing mostly high interest and locally-acquired credit, the government’s debt in 2017 was 22 trillion naira ($61 billion).

While speaking to reporters in Abuja –the country’s capital, the DG of the Abuja-based Debt Management Office, Patience Oniha revealed that “The key benefits of the restructuring of the portfolio are the reduction of the government’s debt-service costs, lowering of interest rates in the domestic market and improved availability of credit facilities to the private sector.”

Following the plunge in crude price and production from 2014 that led to the loss of half of its revenue, Africa’s largest oil producer had to increase borrowing to keep its oil-dependent economy afloat, Oniha said. The Nigerian President Muhammadu Buhari increased spending in order to grow its economy that went into recess in 2015. Africa’s biggest economy came out of recession towards the end of 2017.

Having spent 1.6 trillion naira out of a budget of 7.2 trillion naira on servicing debt with only 9 percent of that for external borrowing and the rest spent on local loans in 2017, the domestic debt restructuring is aimed at reducing cost of servicing obligations, the debt office said.

The DG noted that 198 billion naira of maturing domestic debt was repaid to bridle increasing credit cost with earnings from its Eurobond sales at the end of 2017.

“Our projection is that from two sources, the borrowing should be dropping in the medium term, as the rate of increase will be much slower, and instead of borrowing 17-18 percent from the domestic market, we’ll do 7 percent from external sources,” Oniha explained.