Improving Public Debt Management
In the OIC Member Countries
119
Figure 4-22: Nigeria – Creditor Structure of External Public Debt (2015)
Source: DMO (2016, p. 5).The government plans to increase the share of external debt in total debt by maximizing
available funding from concessional and semiconcessional external sources. Foreign debt
instruments to be used are issuing Eurobonds, Diaspora Bonds and International sukuk. To
reduce the exchange rate risk the government intends to issue longterm foreign debt
instruments for funding infrastructure projects.
C) Policy RecommendationsNigeria has established a very professional public debt management. The DMO acts as an
independent agency responsible for debt management. The DMO is even sharing its experience
of debt management and is currently advising South Sudan in developing a debt management
office (Emejo 2015). Transparency is high as the DMO publishes various and detailed reports
about all relevant aspects of the government’s debt portfolio and also other institutions such as
the SEC and the central bank adhere to these standards. There could be, however, more
information about the structure of domestic creditors (for example about the composition of
“nonbank public” creditors).
The share of Nigeria’s domestic debt in total debt is high (about 80%). Domestic debt is
characterized by high interest rates, and a high share of debt maturing and refixing within one
year. The DMO thus targets a debt composition of 60% domestic and 40% external debt and
aims at accessing longterm external borrowing to reach this target. Nigeria has, however,
attained the status of a middleincome country and is therefore less likely to have access to
concessional funding in the future (Uwalek 2016). The expected limited account to
concessional funding and the recent exclusion from the J.P. Morgan local government bond
indexes might make it difficult to achieve the current targets of debt composition, even in the
medium term. Nigeria is recommended to diversify and expand the sources of foreign lending
(see also Oladunjoye 2014). Nigerian authorities are currently expending the institutional
infrastructure for the issuance of Islamic bonds which might attract foreign lenders and can
support the general effort to expand foreign borrowing (see also IMF 2016).
As the DMO pointed out Nigeria still is recommended to diversify the economy to reduce its
dependency on oil exports and foreign exchange risks. During the last years the proportion of
U.S. Dollar in external debt increased constantly. This is aligned with the dominant role of
Nigeria’s oil exports, but may be reduced when it comes to a diversification of the country’s
economy. In particular strengthening the revenue side of the budget might reduce risks of the
government’s debt portfolio.
65% 15% 14%
4% 2%
IDA/AfDB
Bilateral
Eurobond
IBRD/ADB
Others