By Lucas Ajanaku with agency report
The Federal Government is considering restructuring its debt and extending the repayment period of its credit obligations, Finance Minister, Budget and National Planning, Mrs Zainab Ahmed has said.
She added that the government has appointed consultants to advise it as it faces a rising debt-service burden.
The government also plans to refinance domestic debt obligations that are due this year and next, while the country’s N20 trillion ($45.4 billion) in outstanding borrowings from the central bank will be bundled into government bonds, Ahmed said in a Bloomberg TV interview.
“For the larger portfolio of debt, we have just appointed a consultant” to assess how the government can “get additional relief by way of restructuring and negotiating to stretch out the repayments to longer periods,” Ahmed said. She didn’t provide further details.
The economy faces a rising debt service burden that the World Bank estimates will hit 102per cent of revenues this year. The government this week laid out an ambitious N20.5 trillion spending program for next year, half of which is not backed by revenues.
Lawmakers have approved the government’s plan to borrow as much as N8.4 trillion to plug part of the shortfall — an estimated N10.78 trillion or 4.8per cent of gross domestic product (GDP).
“The budget is designed for us to raise financing 50 per cent from domestic and 50per cent from the international financing and this will be a combination of concessionary sources and bilateral sources as well as the international capital market,” she said.
The country will only consider a Eurobond issuance if yields move to levels close to where they were when it last tapped international markets, “with a little markup,” MrsAhmed said.
Nigeria sold a seven-year bond in March at a yield of 8.375per cent, far higher than a similar maturity it raised eight months earlier at 6.125per cent. It later shelved plans to borrow another $950 million in May after yields on outstanding bonds spiked to mid-double digits.
“As it is right now, it’s too expensive for us to borrow from the international capital market,” she said.
Instead, the government will cut tax waivers and incentives given to companies and also plans to introduce new excise duties or levies to ramp up revenues. The yield on the country’s longest tenured 2049 bond closed at 13.972per cent on Tuesday.
Ahmed expects that increased efforts to tackle crude theft, which has cut output to record lows, will produce results in the next three months.
“In the next one, two, three months, we should be able to hit the targets that we have in the budget, which is 1.6 million barrels a day,” she said.