The Debt Management Office (DMO) has explained that the rise in Nigeria’s public debt stock from N97.34 trillion in December 2023 to N121.67 trillion in March is partly due to exchange rate fluctuations.
Director-General of DMO, Patience Oniha, said this in an interview with the News Agency of Nigeria Tuesday in Abuja.
She was clarifying misconceptions about the recently released update of the country’s total debt profile.
She said that the securitisation of N4.90 trillion as part of the securitisation of the N7.3 trillion Ways and Means Advances approved by the National Assembly was also responsible for the N24.33 trillion increase in the debt stock.
According to her, there is also the interest rate, as well as new borrowing of N2.81 trillion as part of the N6.06 trillion provided in the 2024 budget.
She, however, emphasised that the debt stock included the domestic and external debt stock of the 36 states and the Federal Capital Territory (FCT).
Oniha said: “The total public debt as of March 31, showed that the total public debt in Naira terms stood at N121.67 trillion compared to N97.34 trillion as of December 31, 2023.
“While detailed information was provided on the data, such as the split between external and domestic debt as well as the fact that the debt stock includes the domestic and external debt stock of the 36 states and the FCT, it has become imperative to provide some explanations.
“It is important to recognise the fact that Nigeria has undergone some major reforms that have impacted economic indices such as the dollar/Naira exchange rate and interest rates. These two, in particular, affect the debt stock and debt service.”
She further clarified that the increase in Naira in terms of N24.33 trillion between the fourth quarter of 2023 and the first quarter of 2024, did not strictly represent new borrowing.
According to her, the total external debt stock was relatively flat at 42.50 billion dollars and 42.12 billion dollars in the fourth quarter of 2023, and the first quarter of 2024, respectively.
“The Naira values were significantly different at N38.22 trillion and N56.02 trillion, respectively, representing a difference of N17.8 trillion.
“This explains the perceived sharp increase of N24.33 trillion in the total debt stock in the first quarter of 2024.
“The difference in the exchange rate for the two periods also explains why, in dollar terms, the total debt stock actually declined in the first quarter of 2024 to 91.46 billion dollars,” Oniha said.
The DMO boss said the debt report was somewhat an improvement from the past, before President Bola Tinubu’s government.
According to her, if you discount FX impact, the debt is moderate and within the normal limit.
She urged the federal government to prioritise fiscal retrenchment while assuring that the various measures to attract foreign exchange inflows would increase external reserves and support the Naira exchange rate. (NAN)
…CBN seeks end to excessive FX volatility
Meanwhile, the Central Bank of Nigeria (CBN) has disclosed that the worst is over for the Naira’s fluctuations.
CBN Governor, Olayemi Cardoso, struck an optimistic tone regarding the naira’s stability in a recent interview with Bloomberg TV.
He expressed satisfaction with the progress made in curbing volatility and suggested the worst may be over for the Nigerian currency.
“We do believe that we have more or less seen the worst in terms of volatility,” Cardoso stated, underscoring his confidence in the measures implemented by the CBN.
He attributed this stabilisation to several decisive actions taken by the central bank, and emphasised the Monetary Policy Committee’s (MPC) commitment to deploying all necessary measures to curb inflation and maintain currency stability.
The CBN governor also noted the importance of continuous monitoring and intervention in the market to ensure optimal performance.
“We are also very alive to observing the way and manner in which that market operates and ensuring that it gives the best value that can be accomplished using certain tools,” he added.
Cardoso’s optimism stems from the CBN’s multi-pronged approach to stabilizing the naira prior to the recent interventions, speculation and manipulation in the FX forward contract market were contributing to naira volatility.
The CBN took steps to address this by tightening regulations, increasing transparency, and potentially even intervening directly to smooth out imbalances by releasing FX belonging to foreign companies initially withheld.
Another significant move was the CBN’s decision to allow the naira to trade more freely, reflecting market forces.
This moves away from a fixed exchange rate system aimed to improve transparency and attract foreign investment.
The CBN also employed various monetary policy tools to influence the exchange rate.
This includes raising interest rates to make naira-denominated assets more attractive and curb inflation, which actually weakened the currency.
Though Cardoso did not explicitly mention it, the CBN also resorted to strategic interventions in the foreign exchange market by buying or selling naira to influence its value.
While acknowledging progress on the exchange rate, Governor Cardoso emphasised the CBN’s unwavering commitment to tackling inflation.