DMO faults IMF projection over Nigeria’s debt sustainability

The Debt Management Office (DMO) has faulted the projection of the International Monetary Fund (IMF) that Nigeria may spend 92.6 percent of its revenue on debt servicing in 2022.

The IMF’s projection is contained in its recently released 2021 Article IV consultation report on Nigeria.

Agusto and Co, a credit rating agency, also forecasted that the figure will be around 90 percent.

Reacting in a statement posted on its official Facebook page on Saturday, the DMO said while Nigeria’s debt and debt service levels may have grown over the years, the reports of the two bodies failed to consider the challenges experienced by the country in recent times.

It listed the challenges to include two recessions, sharp drop in revenue and security challenges.

“Even more, the analyses do not acknowledge the improvements in infrastructure which have been achieved through borrowing, as well as the strong measures by the Government to grow revenues,” the statement reads.

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The debt management agency said the federal government is already implementing policies towards increasing revenue generation and developing infrastructure through public-private partnership arrangements.

According to the DMO, these two efforts of the government will improve debt sustainability.

The agency added that the federal government had active and regular engagements with the IMF on borrowing and debt management.

Meanwhile, the DMO also revealed that it will auction N150 billion federal government bonds to investors on Wednesday, February 16, 2022.

According to the circular, the bond issuance will be in two tranches valued at N75 billion each.

The first tranche is the 10-year, 12.5 percent FGN Jan 2026 re-opening bond, while the second is the 20-year, 13 percent FGN 2042 reopening bond.

It said the bonds sell for N1,000 per unit, subject to a minimum subscription of N50,001,000 and in multiples of N1,000 afterwards.

The DMO stated that the settlement date of the bond issuance is February 18, 2022.

For re-openings of previously issued bonds (where the coupon is already set), the agency specified that successful bidders are required to pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument.

It said interest on the bonds would be payable “semi-annually” while bullet payments would be made on maturity date.

The DMO said the bonds qualify as securities in which trustees can invest under the Trustee Investment Act.

“Qualifies as Government securities within the meaning of Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds amongst other investors,” the circular reads.

“Listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange. All FGN Bonds qualify as liquid assets for liquidity ratio calculation for banks.”

The debt management agency assured investors that all bonds are backed by the full faith and credit of the federal government of Nigeria and are charged upon the general assets of Nigeria.