The Federal Executive Council (FEC) Wednesday approved a new Medium-Term Debt Management Strategy (MTDS) for Nigeria from 2020-2023.
Under the new borrowing plan, the federal government capped the total public debt at not more than 40 percent of the Gross Domestic Product (GDP).
By implication, the new borrowing strategy will now come from promissory notes to be issued to settle government arrears; and the Ways and Means Advance at the Central Bank of Nigeria.
The Ways and Means (W&M) facility functions as the government’s overdraft account with the Central Bank of Nigeria- the facility which enables cash advances from the CBN to the government.
“When the Federal Government exceeds its revenue, the CBN finances government deficit through Ways and Means Advances subject (in some cases) to the limits set existing regulations,” CBN said.
“The direct consequence of Central Banks financing of deficits are distortions or surges in monetary base leading to adverse effect on domestic prices and exchange rates i.e. macroeconomic instability because of excess liquidity that has been injected into the economy,” the apex bank further stated n its website.
In a statement by the Debt Management Office (DMO) on the new borrowing plan, the agency said total public debt as a percentage of the nation’s GDP will increase from 25 percent to 40 percent “in order to accommodate new borrowings to fund Budget Deficits and other obligations of Government”.
This ratio, the DMO explained, “is still well below the World Bank/ International Monetary Fund (WB/IMF’s) recommended threshold of 55 percent for countries in Nigeria’s peer group.”
From 2020 to 2023 when this new borrowing strategy is supposed to last, DMO said, “Borrowing will be from domestic and external sources but a larger proportion of new borrowing will be from domestic sources using long-term instruments while External Borrowing will be prioritized concessional funding from multilateral and bilateral sources.”
Portfolio Composition from 2020 to 2023, the DMO further said, will be in the mix or ratio of Domestic 70 percent: External 30 percent.
This, it added, is “to further strengthen the domestic debt market and optimize access to both Concessional and Commercial sources of funding”.
On refinancing of new debts, the DMO said the government will be doing an average Tenor of Debt Portfolio of 10 years minimum while long-Term to Short-Term Domestic Debt Mix will be in the ratio of 75%:25%.
The statement also said this “is to sustain the issuance of longer-tenored instruments with tenors of 10 years and above, in order to effectively manage refinancing risks.”
The implementation of the MTDS over the years, said the agency, “has helped in managing the structure of the growing public debt, and ensured debt sustainability, as well as effectiveness in public debt management.”
The DMO assured that the Strategy will be implemented to support economic development while ensuring that the Public Debt is sustainable”.
The MTDS is a policy document that provides a guide to the borrowing activities of the government in the medium-term, usually four (4) years.
It is recognised as one of the best practices in public debt management and is recommended by the World Bank (WB) and International Monetary Fund (IMF) to ensure public debt management is driven by a well-articulated Strategy structured to meet a country’s broader macroeconomic and public debt management objectives.
The MTDS, 2020-2023 was prepared by the Debt Management Office (DMO) in collaboration with the Federal Ministry of Finance, Budget and National Planning; Central Bank of Nigeria; Budget Office of the Federation; National Bureau of Statistics and the Office of the Accountant-General of the Federation.
According to the DMO, “Nigeria has had two (2) Medium Term Debt Management Strategies (2012-2015 and 2016-2019), prior to the current Strategy”.
The new strategy, it said, “had to be re-worked to reflect the global and local economic impact of the COVID-19 Pandemic and incorporates data from the revised 2020 Appropriation Act and the Medium-Term Expenditure Framework 2021-2023. Thus, the new MTDS adequately reflects the current economic realities and the projected trends”.
Damaturu project
Meanwhile, the FEC also approved N8.4 billion for the construction of a dam for the Damaturu Water Supply project in Yobe state.
Minister of Water Resources, Mr. Suleiman Adamu, disclosed this while briefing State House correspondents at the end of the weekly FEC meeting chaired by President Muhammadu Buhari.
The minister said the approval would help address water supply challenges in the state, caused mainly by insurgency.
“I presented a memo for the construction of Damaturu water supply project in Yobe State in favour of three contractors at a total sum of N8.43 billion. The contracts divided into three are all groundwater or borehole-based projects spread over a wide distance because they are covering three major cities.
“They will be mostly solar-based and also they are in response to the critical needs of these localities within Yobe State, especially as they have been suffering a lot because these areas are affected by the Boko Haram insurgency which started several years ago and therefore, we need to support their water supply needs.
“These are high Sahelian regions where surface water is difficult to come by so we hope that by this intervention, the water supply in these locations would be greatly enhanced,” he said.
The minister said the project has a completion period of twenty four months.
National ICT Park, other
Similarly, the FEC also approved N 8.9 billion for the Ministry of Communication and Digital Economy to construct a National Information, Communication and Technology (ICT) Park in Abuja.
Announcing this at the end of the meeting, Minister of Communications and Digital Economy, Dr Isa Pantami, said when completed, the park would coordinate public and private ICT hubs in the country.
The minister said government would soon release the timelines for the smooth transition of Bank Verification Number (BVN) with the National Identification Number (NIN) for bank accounts.
He said about 4,200 square meters land had been acquired for the establishment of the ICT Park.
“The wisdom behind the ICT Park is for it to be a centre where public and private ICT hubs are going to be coordinated by the federal government of Nigeria, where young innovators with vibrant and developmental ideas will be mentored and all what they need provided for.
“We will provide the enabling environment for them to utilize and come up with innovative technologies. This is the first of its kind in Nigeria, we have so many parks and hubs but they are regional.
“This one will be central and will be a centre of job creation for our teaming youths. It will be a centre where technology will be developed and incubated. It will play a significant role in reducing unemployment and reducing the gap of unemployment.
“The Federal Executive Council has approved the memo and we are going to start establishing it in Abuja and we hope Abuja is going to be another Silicon Valley in Nigeria,” he said.
Also speaking, Minister of Humanitarian Affairs, Disaster Management and Social Development Sadiya Umar Farouk said the council approved a National Policy on Aging.
She said the objective of the policy was to ensure that older persons in the society were guaranteed security, independence participation, comprehensive care, self-fulfilment and dignity.
“The policy covers a spectrum of issues and opportunities for older persons, older persons with disabilities, older persons who are internally displaced, older persons engaged in farming in Nigeria, in urban and rural areas,” she said.
Buni lauds Buhari
Meanwhile, Yobe state Governor and Chairman APC Caretaker Extraordinary Convention Planning Committee Hon. Mai Mala Buni has commended the federal government for approving N8bilion for the Damaturu urban regional water supply project.
The governor said the project would tremendously contribute to solving water scarcity in Damaturu the state capital.
Buni said the project would complement efforts of the state government in addressing water problems of the state capital and its environs.
“I want to specially appreciate President Muhammadu Buhari and the Federal Executive Council for considering and approving the completion of this very important project that would touch the lives of our people.
“This is another dividend of democracy extended to Yobe state by the President Muhammadu administration.
“It is important to us because, Damaturu the has over the years increased in size and population, and is in need of a corresponding water supply.
“The state government has continuously been making efforts to improve water supply across the state to meet the water needs of the people” he said.
The governor further said a committee on rehabilitation of water facilities was constituted with massive intervention which has improved water supply in all the major towns of the state.
Governor Buni assured of the cooperation of the state government and people of the state towards ensuring successful completion of the project.
