We’ll comply with Jonathan’s 30% debt target – DMO

Director-General of the DMO, Mr. Abraham Nwankwo | credits: voiceofnigeria.org
Director-General of the DMO, Mr. Abraham Nwankwo
| credits: voiceofnigeria.org

The country will not borrow more than 30 per cent of its Gross Domestic Product as set by President Goodluck Jonathan, the Debt Management Office has said.

In a telephone interview with our correspondent in Abuja on Tuesday, the Director-General, DMO, Dr. Abraham Nwankwo, said the target, which Jonathan set in his 2012 budget speech, remained valid even though the World Bank had expanded the nation’s limit.

He said, “Nigeria, particularly under the administration of President Goddluck Jonathan, is committed to ensuring fiscal prudence and debt sustainability.

“Even when Nigeria’s peer group debt to GDP threshold was 40 per cent, the President had announced that the country would not borrow beyond 30 per cent debt to GDP ratio.

“Now that the World Bank/IMF classification has placed Nigeria in a peer group to be guided by a debt to GDP ratio of 56 per cent, because of the country’s cautious posture, it will still be guided by the old peer group threshold of 40 per cent.”

Nwankwo also said, “That the country has subscribed to the 40 per cent peer group threshold does not mean that it must borrow up to that limit. Rather, the country prefers to have a lower country specific actual limit.

“Accordingly, whether in the old classification of 40 per cent or in the new one of 56 per cent debt to GDP ratio, Mr. President’s pronouncement that Nigeria’s actual borrowing will not exceed 30 per cent debt to GDP ratio remains valid as the limit guiding the country’s public borrowing.”

At the presentation of the 2012 budget, Jonathan lamented the rate at which the nation’s debt had been rising, especially the domestic debt component.

To limit the growth, he said the government would not expand the debt growth rate beyond 30 per cent.

At the moment, the debt to GDP is less than 20 per cent. With the latitude of 40 per cent debt to GDP ratio, the government can add up to 100 per cent to the current debt level.

Nigeria’s GDP as of December 31, 2012 stood at N41.18tn, according to the National Bureau of Statistics.

A debt limit of 40 per cent based on this GDP means that the country can grow its debt profile to N16.47tn. At 30 per cent limit set by Jonathan, the debt can rise to N12.35tn.

The DMO put the nation’s external debt at $6.67bn as of March 31, 2013, while it put the domestic debt component at N6.537tn as of December 31, 2012.

The nation’s growing debt, which has been a source of concern to many stakeholders, is reflected in the increasing cost of servicing debts.

The Federal Government will spend a total of N591.76bn on servicing of debts this year, according to details provided in the 2013 budget.

Out of that provision, N543.38bn will go into servicing of domestic debt, while foreign debt servicing will gulp N48.39bn.

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