The Debt Management Office (DMO) is set to repay in full at maturity, the ₦198.032 billion Nigerian Treasury Bills (NTBs) maturing this month.
Details provided yesterday by the debt office showed that ₦131.415 billion and ₦66.617 billion of NTBs will mature on December 14 and 21. Before now, the practice was to rollover NTBs at maturity.
In a statement, it said redemption overtime, will help reduce the refinancing risk associated with short-term borrowings through NTBs with tenors of 91, 182 and 365 days. As at September 30, NTBs accounted for 30.23 per cent of the Federal Government of Nigeria’s (FGN’s) domestic debt of ₦12.5 trillion compared to the DMO’s target of a maximum of 25 per cent.
Providing further details, the DMO stated that the NTBs will be redeemed primarily using proceeds of the $500 million raised through a Eurobond Issuance by Nigeria,last month. Nigeria had issued a dual-tranche $3 billion Eurobond in November out of which $2.5 billion is to part-finance the deficit in 2017 Appropriation Act.The balance of $500 million is for the refinancing of domestic debts.
By redeeming the ₦198.032 billion NTBs, the government is not only implementing its debt management strategy but providing liquidity to the financial system to enable the private sector access credit from banks and issue securities in the domestic market to raise funds.
The DMO expects operators in the market to use this opportunity to develop the other segments of the debt capital market like the corporate bonds.
The DMO added that this strategy of enabling the private sector to access funds and possibly at a lower cost than was hitherto possible is consistent with the government’s policy of a private-sector led growth.
It will be recalled that the government had announced plans to refinance some maturing domestic debt with external borrowing as part of its overall debt management strategy of reducing debt service costs.
Other objectives of this strategy are to free up space in the domestic market for other borrowers and achieve a more sustainable debt portfolio mix of 60 per cent domestic and 40 per cent external.