DMO, World Bank push states’ debt management laws

Advises on how to cut borrowing

…As Ordia says borrowed funds must be strictly applied

By Emma Ujah, Abuja Bureau Chief & Victoria Ojeme

The Debt Management Office (DMO) recognises the need to borrow with caution and to ensure the prudent utilization of borrowed funds.

The Director-General of the DMO, Ms. Patience Oniha, spoke at a workshop for members of the Senate Committee on Local and Foreign Debts, as well as, the House Committee on Aids, Loans and Debt Management, at Zuba in Niger State, yesterday.

Her words, “The DMO recognises that borrowing should be done with caution to meet developmental and sometimes, social needs, and that proceeds are deployed judiciously. In addition to this position, New Borrowings are undertaken in compliance with legislations and public debt is managed in accordance with international best practice. In the case of the latter, the DMO undertakes an annual Debt Sustainability Analysis and is guided by a Medium-Term Debt Management Strategy which is prepared every four (4) years.”

She spoke against the backdrop of concerns raised in many quarters over the continuous external borrowing by the federal government  and the rising stock of public debt in the country.

Why the workshop

The D-G said that the Workshop was holding “at a most auspicious time, when public debt has become very topical in the local and international environments. Phrases such as debt transparency, fiscal deficit, debt burden, debt trap, default, etc., have become the subject of analysis and media write-ups almost on a daily basis.”

She said that the DMO has been very meticulous in the discharge of its mandate credibly by maintaining a clean database of public debt of both the federal and state governments, as well as that of the Federal Capital Territory.

She added that with the advice of the Office, the nation has been servicing its debts as and when due, thereby allaying fears of default and its consequences.

According to her, “The Debt Management Office (DMO) was established under the Debt Management Office Establishment (ETC) Act, 2003. Prior to its establishment, public debt was managed by multiple MDAs which ultimately led to debt becoming a burden as under that system, it was difficult to determine the size of the Public Debt and Debt Service requirements for each year. Thus, it can be said that the DMO is a child of necessity

“One of the DMO’s core mandates is to maintain a database of the public debt and publish the same. Others include advising the Government on public debt and raising funds for the Government. I am pleased to report that the DMO has not only carried out these responsibilities credibly, it has extended its scope to supporting the sub-national governments.

“Thus, the Public Debt Data for the Federal Government, the thirty-six (36) State Governments and the Federal Capital Territory are published quarterly; debt is serviced as and when due year after year.”

Ms. Oniha noted that public debt has been growing and expectedly, debt service, but that the public “should remember that Nigeria has witnessed economic shocks with major impact on Revenue that have resulted in recession twice and borrowing was a major tool for reversing the trends.”

She added, “The DMO has raised Funds for New Borrowings in the Appropriation Acts to meet the Government’s financing needs and has been responsible for financing over 90 percent of the deficits in the Annual Appropriation Acts. Another very important role which the DMO has played through its borrowing operations is the development of the domestic fixed income securities markets.

“Closely related to this is the access which it has created for Nigerian corporates in the International Capital Market. These have been achieved through various products: Nigerian Treasury Bills, FGN Bonds, FGN Savings Bonds, Sukuk, Green 2 Bonds, Eurobonds and a Diaspora Bond. In this important developmental role, the DMO has won a number of awards locally and international from credible organisations.”

How to cut borrowings

Ms. Oniha advised a greater adoption of Public Private Partnerships (PPPs) to fund more infrastructure projects, in order to borrow less.

She stated, “Going forward, there should be a strong emphasis on revenue generation from multiple sources to ensure that debt is sustainable. In addition, the initiatives that have been introduced to finance capital projects through Public-Private Partnerships, should be sustained to reduce the need for direct borrowing by the Government to fund infrastructure projects.”

In his remarks, Senate  Committee chairman on Local  and Foreign Debts Sen.  Clifford Ordia called on the members to have a second look at the Debt Management Office Establishment Act, 2003 with a view to amending it to meet the realities of the present situation.

According to him, ” A clearly defined policy must be articulated or reviewed by the government to streamline projects that loans can be obtained for. As a committee, we will give priority to projects that will develop human capital and critical infrastructures that have the potential to generate revenue and create employment. 

” Government must demonstrate strict fiscal discipline in its transactions, particularly funds that are borrowed for specific projects or programmes. Funds borrowed must be deployed to the completion of the project for which it was borrowed  so as to achieve the desired goal.”

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