Nigeria retires matured bonds in move to curb local debt

Nigeria retired matured bonds and plans to cut domestic borrowing to 500 billion naira next year as part of a move to reduce growing debt,Bloomberg reports Finance Minister Ngozi Okonjo-Iweala said.

This year’s local borrowing target of N577 billion is expected to decrease next year as Africa’s biggest oil producer retreats from the height reached in 2010, when it exceeded a target of 867.5 billion naira and sold 1.1 trillion naira of bonds. Nigeria “for the first time” retired 75 billion naira of maturing bonds in February and will continue to do so to reduce debt, Okonjo-Iweala said Friday in an e-mailed statement.

Africa’s most populous country of more than 160 million depends on crude oil exports for about 80 percent of government revenue and 90 percent of foreign income, according to the central bank.

The benchmark interest rate has remained at a record high of 12 percent since October 2011, as the central bank tries to curb inflation and support the naira, helping spur bond demand.

Nigeria’s local debt has grown since it liquidated a foreign debt of $30 billion in 2006 by paying $12 billion and getting forgiveness for $18 billion in a deal negotiated by Okonjo-Iweala.

Domestic debt stood at N6.1 trillion at the end of March while foreign debt stood at $6.7 billion, according to the Abuja-based Debt Management Office.

Under a strategy to run from this year, the government plans to increase foreign borrowing to about 40 percent of total debt from current 14 percent, Minister of State for Finance Yerima Ngama said on May 15. The government will opt for cheaper, longer-term foreign loans and reduce short-term domestic borrowing, he said.