BY BABAJIDE KOMOLAFE & PETER EGWUATU

The Debt Management Office, DMO, has dismissed allegations that the Federal Government was crowding out private sector from the bond market.

Director-General of DMO, Dr. Abraham Nwankwo, who spoke weekend in Lagos, also said that the Federal Government had been able to diversify its holding of FGN bonds as the foreign investors’ holdings in FGN securities at the end of December 2012 amounted to US $5.112 billion, compared to about US$500 million at the end of January 2012.

On the allegation that Federal Government was crowding out private sector from the bond market, Dr. Nwankwo said: “How can the Federal Government crowd-out the private sector from a market which was not in existence?

“We should remember that before 2000, the bond market did not exist in Nigeria, and it was the Federal Government that created and developed the market.”

Nwankwo spoke to newsmen during a one-day retreat programmes organised for editors and finance correspondents in Lagos.

He said that the Federal Government hadd reduced its domestic borrowing to allow the private sector have access to funds in both local and international market.

He said: “Market based funding of the Federal Government’s financing needs started in 2003, and that marked a turning point in domestic debt transformation.

“The initiatives include tenor elongation and establishment of sovereign yield curve of three months to 20 years thereby creating a market for long term funds;

“The diversification of the holding structure of FGN securities to achieve about 93 percent non-Central Bank of Nigeria holding, while the balance of about six percent is being held by CBN through its operations in the discount window of the secondary market;

“Streamlining and restructuring of the different types of outstanding debts instruments; and regular issuance of bonds and development of active secondary market for FGN Bonds, among others.”

He said that the achievements recorded in the development of the domestic debt market had led to the recognition and endorsement of the FGN Bond market by reputable international financial institutions,such as JP Morgan and Barclays Capital.

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