Nigeria is borrowing to fund the 2020 budget

Nigeria plans to talk to concessionary lenders about 850 billion naira ($2.8 billion) in external borrowings earmarked in its 2020 budget, the head of the debt office said on Friday.

“The 850 billion naira does not mean Eurobonds. We will still talk with concessionary lenders,” Reuters News Agency reports that the Debt Management Office Director General Patience Oniha told reporters. 

Nigeria has been borrowing to fund growth after a 2016 recession slashed income and weakened its currency. The government is now seeking to raise revenues through value-added tax hikes, but the cost of debt service is also rising. 

Oniha said the strategy is to seek concessionary loans first due to the lower interest rate and longer maturities, and any shortfall might be raised from commercial sources. 

Nigeria has budgeted to spend 10.59 trillion naira ($34.6 billion) for 2020, which assumes a deficit of 1.52% of the estimated gross domestic product – around 2.18 trillion naira – to be funded through foreign and domestic borrowing. 

The debt office said Nigeria has a debt-to-GDP ratio of 18.47% – below its limit of 25% and comparing favourably with those of developed countries, some of which are above 100%. 

However, Nigeria, Africa’s biggest economy, spends more than half of its revenues in debt service, the debt office said. 

Total public debt rose to 26.2 trillion naira as of September, up 16.88% from a year earlier. The debt office said it has managed to stretch out the maturity profile of its borrowings in favour of longer term debt. 

For new local financing, the debt office said the government would issue 150 billion naira worth of sukuk this year, in addition to bonds and treasury bills. 

In a presentation seen by Reuters on Thursday, the debt office said it would introduce a 15-year maturity for the first time and sell a new 30-year bond, after launching the tenor last year, to extend the maturity profile of its debt.