Budget deficit: FG plans to raise N1.884 trillion

By SEGUN ODUNEWU

IN other to finance the yet to be passed 2016 budget of N6.08 trillion, the federal government has reinstated its committed to raise about 1,884 trillion to finance the N2.22 trillion deficit in the budget.

According to the Debt Management Office, N984 billion is expected to be raised in domestic borrowing while another N900billion will be sourced from the foreign debt market. In pursuit of this, DMO, said it would raise N100 billion in local currency denominated bonds on behalf of the government this week.

This is coming against the plan to raise about N390 billion in total local borrowing by end of this quarter, less than three weeks from now. This is also expected to be tied to the total borrowing plan for N984 billion local bond issue in 2016 fiscal plan.

A breakdown of the instrument shows that a N40 billion worth of the bond will be issued with a maturity date in 2036, another N40 billion of the paper maturing in 2026 and the balance N20 billion of the debt maturing in 2020. About N60 billion worth of the instrument with 2026 and 2020 maturity dates are re-openings of the previously issued papers, while the 2036 dated instrument is a fresh issue.

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In the first debt auction of this year, which took place January 20, 2016, the DMO issued N40 billion and N60 billion of bonds maturing in 2020 and 2026. The 2020 debt is a re-opening of a previously issued instrument, while the 2026 debt is a new issue. DMO said it will issue between N40 billion and N60 billion in fresh instruments in each of the first three months of the year.

The deficit will take the country’s overall debt profile to 14 per cent of the gross domestic product, GDP. Financial analysts believe that government might increase its domestic borrowings due to budget funding gaps and likelihood of failure in the foreign debt market due to policy gaps between the government and the international financial markets over exchange rate policy.

Moreover, the attraction to leverage domestic market is high with high liquidity in the banking system which had pushed over-subscriptions in the domestic debt instrument issues.