Nigeria’s total foreign debt has risen to $5.23bn, according to the Debt Management Office.

Statistics obtained from the DMO on Monday showed that the nation’s foreign debt increased from $4.58bn at the end of last year to $5.23bn as at March 31, 2011. This represented a 14.16 per cent increase within a period of three months.

According to the DMO, the increment resulted from the $500m loan obtained from the International Capital Market by the Federal Government recently, as well as variations in exchange rates.

A segmentation of the nation’s debt profile showed that a greater proportion of it came from the World Bank Group, as this source contributed $3.79bn to the total external debt stock.

The African Development Bank Group, on the other hand, accounts for $398.75m, while commercial loans account for $188.61m.

The country also owes $161.33m in bilateral loans in addition to the $500m ICM loan.

The domestic debt component, on the other hand, has risen to N4.87tn from the N4.5tn, which DMO declared at the end of December 2010.

Much of the domestic debt was incurred through the Federal Government of Nigeria bonds, issued on monthly basis by the DMO and with maturity dates ranging from three to 20 years.

The FGN bonds accounts for N3.06tn or 62.78 per cent of the total debt profile.

The Nigerian Treasury Bills contributed N1.44tn or 29.57 per cent to the debt stock, while Treasury Bonds accounted for N372.9bn or 7.7 per cent.

The Director-General, DMO, Dr. Abraham Nwankwo, had explained that the nation’s growing domestic debt was necessary to deepen the market and provide a vital source of funding for government’s budget deficits.

He said, “The DMO reintroduced the issuance of sovereign bonds in 2003 but started regular bond issuance in 2005, based on a programmed monthly issuance calendar. With external borrowing limited to the concession windows, borrowing from the domestic market became the main source of raising capital by the Federal Government for funding its activities.

“The policy shift towards the development of the domestic market was anchored on the desire to not only finance government budget deficits, but also provide the much needed platform for raising long-term capital for funding public and private sector projects. It is also to insulate the domestic economy from external contagion, develop the domestic capital market and provide a benchmark for pricing other financial instruments in the system in line with global best practices.”

Consequently, as at December 31, 2010, domestic debt accounted for 86.71 per cent of the nation’s total debt stock, which stood at about N5.19tn.

The DMO’s Annual Report and Statement of Accounts 2009 showed that the country spent $3.18bn on debt servicing in 2007. This increased to $4.05bn in 2008 and dropped to $2.34bn in 2009.

In terms of proportion, the domestic debt component accounted for 67.91 per cent, 88.54 per cent and 81.67 per cent of the debt servicing expenditure in 2007, 2008 and 2009 respectively.

External debt, on the other hand, accounted for 32.09 per cent, 11.46 per cent and 18.33 per cent of the total debt servicing expenses in 2007, 2008 and 2009 respectively.

Nwankwo said the concern of Nigerian citizens on the level of the nation’s debt had been taken into consideration by the Federal Government.

For this reason, he said, deficit financing had been reduced from 6.02 per cent in 2010 to 3.62 per cent in 2011 and would further reduce to 2.88 per cent and 2.62 per cent in 2012 and 2013 respectively.

He added that the nation’s domestic debt had not reached the level where the public sector could be said to have crowded the private sector from the debt market as the World Bank had alleged.

According to him, the DMO is developing a plan for helping the private sector to access the bond market for long-term funding needs.