The federal government has approved Nigeria’s Medium Term Debt Management Strategy (MTDS) for 2024 2027, a plan designed to ensure the country’s debt sustainability, improve fiscal stability, and deepen the domestic securities market.
The Debt Management Office (DMO) announced on Saturday, August 23, that the Federal Executive Council (FEC) has endorsed the policy framework for the MTDS.
Developed with technical assistance from the World Bank and the International Monetary Fund (IMF), the MTDS is regarded as a global best practice for managing public debt.
The strategy aims to balance the government’s financial needs with debt sustainability while minimizing the costs and risks of borrowing.
“The key objectives of the MTDS are to meet the Government’s financing needs and payment obligations in the short to medium term, taking into consideration the costs and risks trade offs in the debt portfolio, to achieve optimum composition of the public debt portfolio that ensures debt sustainability, and to further deepen the domestic securities market through the introduction of new products,” the statement noted.
The MTDS for 2024 2027 sets several key targets to ensure debt sustainability and manage financial risks.
The strategy projects Nigeria’s debt to GDP ratio will rise from 52.25% at the end of 2024 to a ceiling of 60% by 2027.
It also caps interest payments at a maximum of 4.5% of GDP and sovereign guarantees at 5%.
To reduce foreign exchange risk, the domestic to external debt mix will be adjusted from a ratio of 48:52 to a more favorable 55:45.
Additionally, the average time to maturity for the debt portfolio is set at a minimum of 10 years, and the share of foreign exchange debt will be capped at 45%.
The DMO explained that the MTDS was developed through consultations with key stakeholders in Nigeria’s monetary and fiscal sectors, including the Central Bank of Nigeria (CBN) and the federal ministry of finance.
Technical inputs from the World Bank and the International Monetary Fund (IMF) were also incorporated to ensure the strategy adheres to international standards.
Comments