The Federal Government of Nigeria through the Debt Management Office (DMO) has defended F.G’s recent interest in Eurobonds, saying they’re for financing budget deficits and capital projects.
This was disclosed in a statement by the agency on Wednesday.
It said those criticising the government’s approach failed to consider its borrowing needs as captured in the annual budgets, medium-term expenditure framework, as well as debt management strategy.
Continuing, the DMO explained that the borrowing needs were derived from the annual budgets while the borrowing mix was based on the subsisting debt management strategy.
“Successive debt management strategies have often indicated that the federal government of Nigeria’s (FGN) preferred source of external borrowing is concessional sources rather than commercial sources such as eurobonds,” the statement reads.
The agency clarified that one of the objectives of the Debt Management Strategy 2020 – 2023 is ‘maximising funds available to Nigeria from multilateral and bilateral sources in order to access cheaper and long-tenured funds, whilst taking cognizance of the limited funding envelopes available to Nigeria, due to Nigeria’s classification as lower-middle-income country.
“Given the size of new borrowings in the annual budgets over the years, it would not have been proper for the FGN to raise all the funds from the domestic market as this would result in the government crowding out the private sector and raising borrowing rates.
Consequently, some part of the required funding has to be raised externally.“While loans from concessional sources such as the International Development Association (an arm of the World Bank) are relatively cheaper as stated above, they are limited in amount.
“In addition, they are not available for financing infrastructure and other capital projects”, it added.
