As the Federal Government continues to explore ways of pulling the effects of recession caused majorly by the sharp drop in its oil revenue, the Debt Management Office (DMO) has advised the government to restrict both local and foreign loans to $22.08 billion in 2017, so as to avoid breaching the debt threshold.

Nigeria, Africa’s largest economy slipped into recession for the first time in 25 years in the second quarter of 2016, largely due to low global oil prices, as crude oil sales accounts for about two-thirds of government revenues.

As a result of these developments, the government has planned to spend a record N6.866 trillion or $22.55 billion to help pull Nigeria out of recession in a draft of the 2017 budget waiting for approval by the Senate.

The nation’s debt managers, however, in their 2016 Debt Sustainability Analysis (DSA) report have stated that the maximum amount that can be borrowed (domestic and external) by the Federal Government of Nigeria in 2017, without violating the country-specific threshold, will be 22.08 billion dollars (5.89 percent of 374.95billion dollars).

According to the DMO, “The end-period on Net Present Value (NPV) of the Total Public Debt-to-GDP ratio for 2016 for the Federal Government was projected at 13.5 percent.

For this year, the total public debt-to-GDP ratio is projected at 13.5 percent, the DMO said in the report, it said total public debt stood at 28.10 percent of revenue as of 2015, slightly above a 28 percent threshold set by the government.

As at June 2016, Nigeria’s public debt stood at 16.29 trillion naira, up from 12.60 trillion at end-December 2015.

“Although the level of debt stock is still appreciably low, relative to the country’s aggregate output (GDP), the debt portfolio remains mostly vulnerable to the various shocks associated with revenue, exports and substantial currency devaluation,” the DMO said.

It said its analysis showed that Nigeria’s debt position had deteriorated in 2016 from a low risk of debt distress to a medium risk.

“This highlights a potential risk to the debt portfolio, which could be exacerbated by the developments in the international oil market, as further decline in global oil prices would exert undue pressures on the already fragile economy, including the debt position,” the DMO said.

The DMO also emphasised that the recommendation was made, taking into account the absorptive capacity of the domestic debt market and the options available in the external market.

Nigeria’s total debt portfolio rose 30 percent to $62 billion in 2014, up from $47.6 billion as at September 2013.

The country’s external debt stood at $9.52 billion, 15 per cent of the entire debt stock.

Domestic borrowing, however, accounted for bulk of the total money owed by Africa’s largest economy.

Prior to the 2005 debt relief, bad debt management practices led to the payment of $4.9 billion yearly on debt servicing.

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