By Babajide Komolafe
Debt Management Office, DMO hasÂ dismissed apprehensions over the nationâ€™s mounting debt stock saying borrowing is critical for development.
â€œThere is nothing bad in borrowing. The most important thing is that there should be transparency and accountability in the utilisation of the funds borrowed,â€ said Dr. Abraham Nwankwo, Director-General, DMO,
â€œMany infrastructural projects across the country were funded through borrowed fundsâ€, he said during a media interactive session in Lagos last week.
He said for example, the federal government used funds raised from issuance of sovereign bonds to finance some critical developmental projects such as N200 billion commercial agriculture project; the Nigerian cotton textile and garment scheme; the revitalisation of railway transportation through the purchase of locomotives; and the development of new districts as well as access roads and infrastructure in Abuja.
He said the nationâ€™s total debt stockÂ as at end of December 2009 standsÂ $25,743 millionÂ comprising $21.796 million of domestic debtÂ (owed local contractors and and $3.947 million of external debt. He said that with the external debt stock constituting 15.3 per cent of the total debt stock the nation is insulated from the vagaries of international debt burden.
He said that the FGN bonds have been increasing awareness and confidence in FGN bonds issued by the DMO and this has translated to increased demand for sovereign bonds. This he said has enabled the DMO to increasing raise funds from the local economy through bonds to fund part of the yearly budget of the government.
He disclosed that the DMO has raised N2.44 trillion from the domestic investment community through bond issuance and this year it would fund N860 million of the 2010 budget through issuance of bonds.
He said in addition to this, the $500 million Nigerian sovereign bond planned for the international capital market, which was suspended last year owing to the global economic meltdown, will be issued this year.
Speaking further on the $500 million bond, Director, Market Development, Mrs Patience Oniha, expressed optimism that the bond would be successful. He said based on our discussions with the international investors, we are sure there is demand for the bond, adding that the feeling among international investors is that the $500 million is even too small.