The Federal Government, on Monday, June 20, announced that it would increase external borrowing to 40 per cent as part of its new debt management strategy over the next four years.
Director-General, Debt Management Office, DMO, Dr. Abraham Nwankwo, who addressed newsmen on the details of the new debt strategy, said the mix of the borrowings will be 60 per cent domestic while the 40 per cent will be sourced externally as against the old ratio of 84 per cent domestic and 16 per cent external.
The DMO Boss said the borrowing will be progressively increased, taking into account the need to moderate foreign exchange risk in the short to medium-term.
He justified the shift on the ground that external borrowing was cheaper than internal borrowing. He said: “There will be lower cost of fund and we will be avoiding the risk of crowding out the private sector.”
Nwankwo added that the private sector will still be expected to play a leading role and will be required to mobilise more funds as well as complement government’s efforts.
He however assured that servicing the debts, given the country’s challenging forex circumstances will not be a problem because Nigeria has abundance of opportunities to explore to diversify her economy and earn forex outside crude oil.