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Nigeria cannot survive on endless borrowing – DMO

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…says FG cannot access Eurobonds, lenders avoiding B-rated countries

The Debt Management Office has revealed that it is difficult for Nigeria to borrow in international markets, as global lenders and investors shun countries categorized as “B”.

According to the Director General of the DMO, Patience Oniha, Nigeria needs to accelerate its revenue campaign while seeking alternative sources of funding internationally. “We really can’t survive like this,” she said.

Oniha, while appearing before the House of Representatives Committee on Aid, Loans, and Debt Management to defend the DMO’s 2023 budget, noted that the federal government had been unable to reach its external borrowing target, noting that it was now seeking lenders in the United States and Europe.

She said: “Where there is a problem is new external borrowing. What was planned in the 2022 budget is 2.57 billion naira of new external borrowing and this, in terms of naira at the budget exchange rate, is equivalent to 26 billion dollars. The reality is that if it were before, we would have already issued Eurobonds to raise money and we would be in good shape. But let’s say that from the fourth quarter of last year, the international capital markets were not open to countries like Nigeria. So in 2021, there was about $6 billion to raise. We raised $4 billion for that one. But this year it’s $1.25 billion.

“International markets are not looking for countries with our -B ratings. Russia’s invasion of Ukraine, as you know, dramatically changed things in the world. So inflation rates are high, interest rates are high, and investors are saying there’s a lot of uncertainty about what’s going to happen. There is a threat of recession. So what they decided to do was put their money in G-7 securities: United States, Germany, France, Japan, etc. These countries also issue bonds. So that’s where investors are putting their money and rates have gone up dramatically.

Two global economic analysts and ratings, Moody’s and Fitch, recently downgraded Nigeria to a “B” category.

Speaking on debt servicing, the DMO boss said the government needs to pay attention to the deficit percentage in its annual budgets.

She said: “We really need to look at income. For the debt to be sustainable in the medium term, you must earn income. We should not have a budget of N17tn and N10tn deficit, and on top of that (there is) new borrowing of N8.8tn which is 50% of your budget.