The Federal Government will in the next one week redeem N198.03Bn worth of Treasury bills that will mature between Thursday and December 21, the Debt Management Office has said. The DMO confirmed this in a statement made available to our correspondent in Abuja on Tuesday.
Details provided by the office showed that N131.42bn and N66.62bn of the NTBs would mature on December 14 and December 21, respectively. The redemption of the treasury bills on maturity is a departure from the practice in the past as the DMO usually rolled over the NTBs on maturity.
The planned redemption of the treasury bills is in tandem with the Federal Government’s plan to refinance some maturing local debts with foreign loans. The Federal Government had announced a plan to refinance $3bn maturing domestic debt with external borrowing as part of its overall debt management strategy of reducing debt service costs.
Other objectives of the strategy, according to the DMO, are to free up space in the domestic market for other borrowers and achieve a more sustainable debt portfolio mix of 60 per cent domestic and 40 per cent external.
In addition, the redemption overtime is expected to help reduce the refinancing risk associated with short-term borrowings through the NTBs with tenure of 91, 182 and 365 days. As of September 30, the NTBs accounted for 30.23 per cent of the Federal Government’s domestic debt of N12.5tn. The DMO plans to reduce this to a maximum of 25 per cent.
According to the DMO, the maturing NTBs will be redeemed using proceeds of the $500m raised through an Eurobond issued by the Federal Government in November. Nigeria had issued a dual-tranche $3bn on Eurobond in November out of which $2.5bn was earmarked to finance deficit in the 2017 budget and the balance of $500m for refinancing of domestic debt.
The DMO said by redeeming the N198.03bn NTBs, the Government was not only implementing its debt management strategy but also providing liquidity to the financial system to enable the private sector to access credit from banks and issue securities in the domestic market to raise funds.
It said it also expected operators in the market to use the opportunity offered by the redemption of the NTBs to develop the other segments of the debt capital market such as corporate bonds.
It added that the strategy of enabling the private sector to access funds and possibly at a lower cost than was hitherto possible was consistent with the government’s policy of a private sector-led growth.