Nigeria to retain 40% debt to GDP threshold — DMO

The Debt Management Office has said that Nigeria will continue to maintain a debt  to Gross Domestic Product threshold of 40 per cent considering the economic development in the country. The Director-General, Dr Abraham Nwankwo made this known at the 2013 Debt Sustainability Analysis workshop in Abuja. In their recent economic rating, the World Bank and the IMF ranked Nigeria among the medium income countries.

The elevation also moved Nigeria’s on debt to GDP ratio from 40 per cent threshold to 56 per cent. We should rather be on the conservative side. So, even though for countries with our rating, the net present value to total public debt ratio has been changed to 56 per cent, Nigeria advisedly will remain on 40 per cent for practical purposes.

“But we still continue noting that we belong to the group which has been allowed to borrow up to 56 per cent of GDP Net Present Value. But in terms of policy advice, in terms of strategy, we will still use 40 per cent as our benchmark and as you know, Nigeria  has always had its own local threshold which is always  more conservative than the peer group threshold.’’

According to Nwankwo, each country looks at its peculiarities to fix its threshold outside what is recommended by the international bodies. He noted the various peculiarities that made Nigeria to hang on to the conservative threshold to include history in terms of experience without sustainable debt in the past and over dependence on oil. On the state of the debt profile of states, he said that at present the states debts still remained sustainable adding that it was good for Nigeria to look at the debt issues from the positive side.

He said that before Nigeria’s exit from debt owed to the Paris Club, the country had passed through debt crises, but that efforts had been made to ensure that states were properly guided on debt management. He said that the DMO had established the domestic debt bond market to enable the private sector to access funds that would help to boost the real sector of the economy.

“The states’ debts are sustainable,’’ he stressed. Alhaji Baba Musa, Director, West African Institute of Financial and Economic Management said at the forum that Nigeria was the only country in sub Sahara Africa that had maintained its debt sustainability analysis in the last five year. This, he said had helped in the economic structuring adding that it had helped in the management of its debts profile. He added that the advice to stick to the 40 per cent debt to DGP ratio was a prudent way for the management of fiscal structure in the country.