Nigeria To Turn Central Bank’s $26 Bln Financing Into 30-Year Loan

Nigeria plans to convert 10 trillion naira ($26.3 billion) worth of short-term government financing by the central bank into a 30-year loan, the head of the debt office said on Tuesday.

The proposal comes after the debt office last week increased the country’s debt limit and said it will borrow more at home with historic low interest rates, amid a fall in revenues due to an oil price slump and as COVID-19 has disrupted markets.

“The government is not planning to issue securities to the market to repay the ways & means,” said Patience Oniha, director general of the Debt Management Office. “It will be converted to 30-year loan or securities issued to the central bank.”

Oniha said the debt office was discussing the plan with the finance ministry and central bank.

Nigerian government debt has been rising in recent years, as well as its debt service burden. With the COVID-19 disruption to revenue, debt is projected to rise further.

Last week, the debt office raised Nigeria’s target debt-to-GDP ratio to 40% from 25% to accommodate new loans and to repay short-term central bank borrowings.

Nigeria is facing its second recession in five years, which has created large financing needs, caused chronic dollar shortages and frustrated businesses and individuals.

The International Monetary Fund this month said it expects Nigeria’s financing needs to remain elevated in 2021 with the government relying heavily on domestic sources, including the central bank’s overdraft, which will complicate monetary policy.

The Fund urged Nigeria to phase out the central bank’s financing of the government to reduce inflation.

Nigeria expects a deficit of 5.60 trillion naira ($14.7 billion) for 2021 on a record budget of 13.6 trillion naira, aimed at helping the country tackle a recession brought on by a crash in the price of oil, its main export.

($1 = 380.65 naira)

– Reuters