BY EMMA UJAH & FUNMI OLASUPO
IN response to the favorable domestic market environment, twenty Nigerian corporate organisations have raised long-term capital of over N299 billion from the domestic debt market between 2005 and 2012 to fund the development of the real sector.
Director General, Debt Management Office, DMO, Dr. Abraham Nwankwo, who made the disclosure during a one-day retreat organised for members of the Finance Correspondents Association of Nigeria, FICAN, and Investment Journalists in Kaduna expressed delight over the level of achievement recorded so far.
Nwankwo noted that “Opportunities exist for growth in terms of number and diversity of debt issuers, range of instruments, size and investor base.
“The International Finance Corporation, IFC, a member of the World Bank Group, in March 2013, issued a Naira denominated debt instrument worth US$76 million in the domestic debt market and thereby established a benchmark for other international bond issuers to tap the growing Naira bond market.”
He added that “Prior to the establishment of the DMO in 2000, the challenges of Public Debt Management were inadequate debt data recording system and poor information flow across agencies, complicated and inefficient debt service arrangements, which led to penalties that added to the debt stock, lack of consistent well-defined borrowing policies and public debt management strategies.
“Grossly underdeveloped and weak domestic debt market characterised by structural and systematic defects aggravated the country’s debt management challenges, thereby leading to unsustainable debt profile.”
However, following the historic Paris and London Club debt exist of 2005 and 2006, Nwankwo maintained that “topmost in the DMO’s priorities was the need to articulate a domestic debt management strategy for the government by using a market-based approach to raise finance in the domestic debt market to meet government’s borrowing needs at minimal cost and prudent degree of risks.”
Also, because there is need to create a market for long-term debt instruments, which the private sector can build upon to raise funds for the funding of long-term investment in real sector, it was discovered that it is necessary to develop the domestic bond market as part of the overall program for the development of the financial sector.
Successfully addressing some of the challenges and constraints that faced Nigeria’s public debt management, the DMO has created windows of opportunities for the private sector to raise long-term capital for the development of the real sector and infrastructure.
Already, some private sector firms have explored and exploited these opportunities both in the domestic bond market and in the international capital market.