The federal government has approved Nigeria’s medium-term debt management strategy (MTDS) for the period 2024 to 2027, setting a debt-to-GDP ceiling of 60 percent.
Gatekeepers News reports that according to the Debt Management Office (DMO), the new framework is designed to ensure that Nigeria’s rising debt remains sustainable while meeting the nation’s financing requirements.
Developed with support from the World Bank and the International Monetary Fund (IMF), the MTDS is recognised internationally as a standard tool for managing public debt.
The debt strategy is aimed at striking a balance between borrowing costs and potential risks, expanding the domestic securities market, and optimising the country’s debt composition.
It seeks to meet government’s short- to medium-term financing and repayment obligations while safeguarding long-term debt sustainability.
Under the approved benchmarks, nominal debt as a share of GDP is projected to increase from 52.25 percent at the end of 2024 to 60 percent by 2027.
Interest payments will be capped at 4.5 percent of GDP, up from 3.75 percent in 2024, while sovereign guarantees will be restricted to below 5 percent of GDP, compared to 2.09 percent currently.
The domestic-to-external debt ratio has been revised to 55:45, compared to the previous 48:52. At least 75 percent of domestic borrowing will be long-term instruments, while short-term borrowing will not exceed 25 percent.
In addition, debt maturing within one year is not expected to surpass 15 percent of the total portfolio, a measure intended to curb refinancing risks. Foreign exchange-denominated debt will remain capped at 45 percent of the overall debt stock.
The DMO also noted that Nigeria’s average debt maturity of 11.05 years and average time to refixing of 10.74 years already surpass the minimum 10-year thresholds outlined in the strategy, reflecting relative stability in the country’s debt profile.
The office added that similar measures were applied in 2022 to strengthen debt sustainability while contracting loans for the federal government.
