Patience Oniha, DG Debt Manangement Office (DMO)

The Debt Management Office (DMO) has explained that the proposed borrowing of $5.5 billion from external sources by the Federal government is a good initiative.

President Muhammadu Buhari recently wrote the National Assembly seeking permission to borrow the funds.

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The DMO, on Thursday stated that the $5.5 billion is in two phases.

The first phase which is $2.5 billion represents new external borrowing provided for in the 2017 Appropriation Act‎. While the second represents $3 billion External Borrowing that will be used to repay some of the existing domestic debt.

It said the $2.5 billion proposed Eurobond, will be used to finance critical road and rail projects included in the 2017 Appropriation Act.

The DMO list some of the projects as construction of a Second Runway at the Nnamdi-Azikwe International Airport; rail projects including Lagos-Kano, Calabar-Lagos, Kano-Kaduna, Ajaokuta-Itakpe-Warri, Kaduna-Idu; and the Bodo-Bonny Road with a Bridge across the Opobo Channel.

It said these infrastructural facilities will lead to job creation and improve the climate for business thereby contributing to economic growth.

The DMO also provided further clarifications on the issue of the proposed $3 billion External Borrowing that will be used to repay some of the existing domestic debt.

In the explanation, the DMO stated that this was purely a portfolio restructuring activity that will not result in any increase in the public debt as it is simply an exchange of one type of debt (Domestic) for another (External).

The DMO stated that the Domestic Debt Stock as at June 30, 2017 included about N3.7 trillion of Nigerian Treasury Bills (NTBs) with tenors of less than one year and at interest cost of about 17 percent p.a.

It further listed the benefits of these external borrowing to include, reduction in Debt Service, increase Stability in the Debt Stock and increase in borrowing space for the private sector.