The Debt Management Office (DMO) has said it had projected that over a 10-year period, between 2011 and 2020, a total of $2.770 billion of the country’s debt would be serviced.
The debt office disclosed this in its annual report and statement of account for 2010, a copy of which was obtained by THISDAY at the weekend.
In fact, it said it had projected that by the end of 2011, $381.25 million out of the total debt mentioned earlier, would be serviced, following which, the annual debt servicing would hover below $300 million during the remaining projected period.
“The lower projected external debt service payment after 2011 is based on the assumption that there would be greater reliance on domestic than external borrowing in closing the budget gap in the projection period. This assumption is however, subject to review in the light of developments in the domestic and international capital market,†the report explained.
It also declared that debt servicing was an important component of the federal government’s expenditure profile.
The DMO however revealed that of the country’s total eternal debt, multilateral debt constituted the bulk of the total external debt last year. The DMO explained that the multilateral loans, which it said were mainly concessional loans, amounted to $4.218 billion as at December 2010.
According to the DMO, the disbursement of external debt (excluding grants) by creditors was $791 million in 2010, representing an increase of $442.29 million or 83.01 per cent, from the level it stood in 2009.
It also showed that the country’s forex risk was minimal in its 2010 total debt portfolio, saying that as at December 2010, 86.95 per cent of the portfolio holdings were in naira, while the remaining 13.05 per cent were in other foreign currency.
Commenting on the outlook for the domestic bond market, the report insisted that there were significant opportunities for growth in the market, in terms of number and diversity of bond issuers, range of products as well as the size and diversity of investor base.
“The crash in the equities market in 2008 and the lull that characterised the market since then, have made it imperative for corporates who typically need large long term stable funds to consider bonds as an alternative to issuing equities, while investors have become more aware of the need to diversify their portfolio in order to avoid concentration risks.
“These, together with the various policy measures that have been adopted by government and regulators, as well as the initiatives by market operators to standardise processes and deepen the market, are expected to influence market activities positively in the coming years,†the report further said.
Source: ThisDay/Obinna Chima