Debt Management Office (DMO) wins The Most Outstanding Public Institutions in Nigeria Award 2014-2015

This slideshow requires JavaScript.

 

Dr Abraham Nwankwo has no doubt been a long time achiever with sustainability prowess and has scored many firsts during his school days at the prestigious University of Nigeria, Nsukka (UNN), where he bagged his B.sc. degree in Economics (1980), M.sc. degree in Economics (1983) and was also the first Ph.D graduate in Economics (1985) of the prestigious Institution winning numerous academic prizes!

He is first class Economist with resolute mind-set to bring about rewarding innovation in his chosen field.

Dr. Nwankwo was appointed DG of DMO in 2007, having joined the services of the Agency in 2001 as an Assistant Director.

From July 2006-July 2007, he had a stint at the World Bank where he served as Senior Advisor to the Executive Director (Africa Group II Constituency).

He has before joining the Public Service worked in the banking and finance sector, where he held top management positions; in academics, as a Lecture in Economics at his alma mater for five years; as well as in journalism as an Economics Journalist with the New Breed Organisation.

Dr Nwankwo is a creative writer and has delivered so many lectures in addition to various academic works that had been published in reputable academic journals.

He hails from Umulogho in Imo State of Nigeria and is married with children.

Under Dr Abraham Nwankwo’s dynamic and innovative leadership with dedicated Management and staff at Debt Management Office – a reputable body: Independent Service Delivery Monitoring Group (ISDMG)- a service delivery watchdog.

(Centre For Transparency Advocacy) has identified and honoured Debt Management Office with an award as one of the Most Outstanding Public Institutions In Nigeria 2014-2015!

 

 

DMO                                      

The Debt Management Office (DMO) was established primarily to centrally coordinate the management of Nigeria’s debt, which was hitherto being undertaken by different agencies leading to disused responsibility. This diffused debt management led to inefficiencies. The need for a focused public debt management led to the creation of the DMO in October 4, 2000.

The functions and mandate of the Debt Management Office are as follows:

  • Maintain a reliable database of all loans taken or guaranteed by the Federal or State Governments or any of their agencies.
  • Prepare and submit to the Federal Government a forecast of loan service obligation for each financial year.
  • Prepare and implement a plan for the efficient management of Nigeria’s external and domestic debt obligations at sustainable levels compatible with desired economic activities for growth and development and participate in negotiations aimed at realizing these objectives.
  • Verify and service external debts guaranteed or directly taken by the Federal Government.
  • On an agency basis, service external debts taken by State Governments and any of their agencies, where such debts are guaranteed by the Federal Government.
  • Set guidelines for managing Federal Government financial risks and currency exposure with respect to all loans.
  • Advise the Federal Government on the re-structuring and re-financing of all debt obligations.
  • Advise the Minister of Finance on the terms and conditions on which monies, whether in the currency of Nigeria or in any other currency, are to be borrowed.
  • Submitted to the Federal Government for consideration in the annual budget, a forecast of borrowing capacity in local and foreign currencies.
  • Establish and maintain relationships with international and local financial institutions, creditors and institutional investors in Government’s debts.
  • Collect, collate and disseminate information, data and forecasts on debt management with the approval of the Board.

 

ACHIEVEMENTS AND INITIATIVES  

  1. Insurance of FGN Bonds in Global Depository Note (GDN) format for the first time in July, 2014. The issuance was the first by any African Country and a mechanism for diversifying the FGN Bonds investor base and attracting foreign investors to the domestic securities market.

 

  1. To provide visibility for Nigeria’s public debt management activities, following the increased interest by foreign investors, the DMO in 2014 successfully set up and continued updating of the DMO dedicated web pages on Bloomberg and Reuters, which are the two global platforms for news and financial transactions. The web pages provide visibility for the DMO and FGN’s domestic and international securities.

 

  1. The Debt Management Office hosted special sensitization and capacity building workshops for relevant Ministries, Departments and Agencies (MDAs) on Mastering Debt Recording and Reporting to strengthen debt Management processes, as part of the continued efforts to enhance the debt management capability at the sub-national level.

 

  1. The DMO hosted interactive Sessions between the Coordinating Minister of the Economy and Minister of Finance and the Nigerians in Diaspora in London, New York, Washington D.C and Houston as part of the strategy towards the issuance of a Diaspora Bond.

 

  1. 1493% FGN July 2034 which is the new 20- year Bench mark was added to the Barclays Capital Emerging Markets Local Currency Government Bond Index (EM-LCBI) in September 2014 bringing the number of FGN Bonds in the index to eleven.

 

  1. The Office has adopted sound practices in public debt management, for which purpose it conducts an annual Debt Sustainability Analysis (DSA), in collaboration with other relevant stakeholders; and has prepared a Medium Term Debt Management Strategy (MTDS), 2012 – 2015, which is being implemented and currently in its 3rd phase, 2013- 2017. The current MTDS is aimed at achieving an optimal composition of external and domestic debt structure, and ensure low cost of Government debt, consistent with a prudent level of risk.

 

  1. The DMO’s technical competence has been widely recognized such that the Office now exports public debt management services to other African countries (so far, four countries have benefited, including the Republic of Sudan in 2014), thus, affirming Nigeria’s leadership role in Africa and its growing emerging global prominence in effective public debt management.

 

  1. Sub-national Debt Management Initiatives & Achievement: this is another developmental role which the DMO assumed in its quest to ensure prudent management of resources and the adoption of sound public debt management practices at all levels of governance, is the development of a comprehensive programme for Sub-nationals which would enable them effectively determine their domestic debt stock and manage it as a matter of routine.

 

The Sub-national Initiatives and Achievements include the following:

  • The development of the Template for establishment of Debt Management Departments (DMDs), outlining the legal, institutional and human resource for a functional DMD Outcome(s):

All the 36 States and the FCT have established Debt Management Departments (DMDs), in conjunction with the DMO;

Most of the States have enacted enabling debt management laws, either by passing the Public Debt Management Law (PDML) or the Fiscal Responsibility Law (RFL), to give legal backing to operations of the DMDs.

 

  • The development of Sub-national Borrowing Guidelines which detail the responsibilities of all the stakeholders, and also outline the relevant laws supporting their responsibilities. Outcome(s):

States and their agencies now apply these Borrowing Guidelines and adhere to the requirements for seeking access to funds from domestic capital market and the Commercial Banks.

 

  • The Creation of domestic debt databases for the States and the FCT.

Outcomes(s):

Debt Data Reconstruction (DDR) exercise have been conducted in all the thirty-six (36) States, and the FCT. The DDR programme assists the States with the compilation, recording, analyzing and reporting of debt data, all of which are crucial elements of effective debt management at the sub-national level;

For the first time, total domestic debt figures of the States and FCT were publishes for the year 2011. Subsequently, the 2012 and 2013 domestic debt of States have also been published and are available on the DMO website; and;

The Institutionalization of a framework for the Quarterly rendition of Domestic Debt Data by the States and FCT to the DMO

 

  • Continuous Capacity Building for staff of States DMDs.

Outcome(s):

Workshops conducted on the use of MS Excel for debt data recording and reporting at the sub-national level.

Special Training exercises conducted for states that had been restructured and had new staff to be trained and/or States that have obvious skills gap needed for debt recording and reporting.

Debt Sustainability Analysis training programme conducted for relevant States’ Ministries, Departments and Agencies (MDAs), which were aimed at achieving accurate, reliable and timely domestic debt data submissions by the States’ relevant MDAs to the DMDs and subsequently to the DMO.

Overall, there is an enhancement of public debt management capability at the State level.

 

  • Intensified sensitization of all stakeholders, including banks and other regulatory authorities responsible for controlling States’ borrowings.

Outcome(s):

There is now recourse to the Federal Ministry of Finance by Banks and other operations for clearance before granting loans or facilities to the States.

 

  • Conducting of Debt Sustainability Analysis on a State to decide whether or not to approve each request for new borrowing.

Outcome(s):

There is a drastic curtailment and mitigation of risk of over borrowing by the States.

  1. The issuance of about US$300 million Diaspora Bonds in 2015, which also was approved by the Nigerian Senate on 17th March, 2015. The Diaspora Bond will afford Nigerians in Diaspora the opportunity to invest in the development of the country while earning good returns from their investment.
  2. implementation and operationalization of the Bond Auctioning System (BAS), aimed at facilitating the issuance of FGN securities by the DMO, which had always been conducted on the Central Bank of Nigeria’s auctioning platform.
  3. Conduct of the annual Debt Sustainability Analysis (DSA)
  4. The government’s response in addressing the fiscal imbalance faced by most States of the Federation which was caused by the structural drop in the international price of crude oil by more than 43% and the resultant drop in the revenue allocation from the distributable pool for all governments in the Federation by about 40%.

The situation constrained the ability of many States to meet their financial obligations, including payment of salaries.

As one of the salutary options for short-term fiscal stabilization, the Debt Management Office put forward a proposal for restructuring the short-term bank loans of States into long-term Federal Government of Nigeria (FGN) Bonds. The purpose was to reduce the debt-service outflow of States and free resources for meeting other obligations, particularly, clearance of arrears of salaries and pensions.

A total of twenty-three States had submitted requests for the bank loan to FGN bond restructuring.

Phase I consisted of eleven States which had completed and submitted all necessary documentations, including the submission of jointly authenticated balances with banks as at August 14, 2015. These States had their bank loans restructured into 20 year FGN bonds effective August 17, 2015.

Phase II of the restructuring consisted of twelve States whose bank loans were restructured into 20 years FGN bonds effective September 16, 2015.

The second Phase concludes the restructuring exercise. Fourteen banks were involved in Phase I debt restructuring operation and their total loans to the eleven States which were restructured amounted to N322.788 billion.

Twelve banks were involved in Phase II of the restructuring operation and the total loans restructured for the twelve States amounted to N252.728 billion bringing the total restructured amount for the twenty three States to N575.516 billion.

Some banks featured in both phases but the total number of banks involved was 15. The restructuring was affected using a re-opening of the FGN Bond issued on July 18, 2014 and maturing on July 18, 2034. The pricing was based on the yield to date of the bond at a 30 day average, resulting in a transaction yield 0f 14.83%.

Indicators of the impact of the debt management operations include:

  1. Monthly debt service burden has dropped by a minimum of 55% and a maximum of 97%, among the twenty three States; and,
  2. Interest rate savings for the twenty three States ranges from 3% to 9%p.a.

The restructuring is good not only for the States but also for the banking system because: banks’ balance sheets will improve as weak subnational loan assets are replaced with high quality Sovereign assets; the FGN Bonds enjoy enhanced liquidity as they are traded in the secondary market; and banks would have improved space to lend to other sectors of the economy as they are free to convert their FGN Bond holdings into cash in the secondary market.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEBT MANAGEMENT OFFICE

 

 

 

Nigeria’s Public Debt Stock as at June 30, 2015 (InMillions)

  Debt Category AmountOutstanding USD Amount Outstanding in NGN
A ExternalDebtStock(FGN+States) 10,316.82 2.031,897.80
  DomesticDebtStock(FGNOnly) 42,633.11 8,396,591.57
  Sub-Total 52,949.93 10,428,489.36
B Domestic Debt of States 10,856.52 1,690,360.09
C Grand-Total (A+B) 63,806.45 12,118,849.45

 

CBN Official Exchange rate of 1USD to 196.95NGN as at June 30, 2015 and 155.7NGN as at December, 2013 were used IROFGN and States Domestic debt, respectively.

 

SOCIAL MEDIA/ONLINE PRESENCE

www.dmo.gov.ng

The DMO makes good use of IT tools however; much still needs to be done especially in the deployment of social media tools for better public engagement.

COMPOSITE ASSESSMENT

The Debt Management Office is very crucial to the country’s economic makeup and the Office can be said to have performed averagely during the year under review. A major cause for concern was the delisting of Nigeria from Bond index for Emerging Markets by J.P Morgan for lack of liquidity of transactions and transparency in the determination of exchange rates. However the DG would not have any impact on the quality of the FGN Bonds. The listing of the FGN Bonds on the index had earlier been given by the agency as an achievement.

Our increasing debt profile also remains worrisome. As at the end of March 2015, the total debts of the country had reached $63.5billion. An acceptable argument for this is the falling oil prices and the adjustment of revenues by government both Federal and State.

A plus for the DMO is in its help in facilitating bailouts for 23 states of the federation by working out an agreement under which their domestic debts were restructured for repayment over a much longer period.

CHALLENGES

The Debt Management Office needs operational autonomy to enable it function more effectively. It should be isolated from political influence to guarantee its independence and transparency of the discharge of its statutory functions, in order to benefit the economy.

Use of a rented office accommodation from another Government agency; the Nigerian Deposit Insurance Corporation (NDIC), instead of a space. A solution is currently being pursued through a Public-Private-Partnership (PPP), based on a Build, Operate, Rent and Transfer (BORT) agreement.

Funding constraints for most of its developmental initiatives, notably, its flagship programmes for the States, in the area of building requisite public debt management capacity for staff of States’ DMDs, in a sustainable manner

The agency also needs to ensure that information and data dissemination of its activities are transparent and up to date.

Reviewed by Chukwudi Ozalla                

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s