By Goddy Egene

14 Feb 2011

The Director-General of the Debt Management Office (DMO) Dr. Abraham Nwankwo, has said that the organisation has been able deepen debt market where long-terms credits of between three and 20 years could be accessed.

Speaking in a television programme last week, Nwankwo said that before 2007, government was borrowing from the financial market for
period ranging from 91 days, 180 days and 360 days.

 

“But currently, the DMO has gone from just borrowing for government to meet its budget deficit, to helping Nigeria to develop
its market for long-term funds. There are bonds of three, five, seven, 10 and 20 years, the bulk of which are tied to projects in the agricultural, infrastructure, textile and power, among others,” he said.

 

THISDAY had  last Monday reported that the DMO  raised N3.766 trillion via bonds  for the government between  2003 and 2010.And out of the amount, N865 billion has been repaid leaving N2.901 trillion as outstanding. Some of the funds were raised to finance budget deficit apart from financing infrastructure.

 

Nwankwo explained that debt is the most convenient approach to fund budget deficit provided that debt profile is sustainable.
He said, “Debt is a resource acquired to take care of a need. When planned (budgeted) expenditure is more than projected revenue, there is a deficit.

 

Debt is the most convenient approach to funding that gap, while making sure it would not make total debt portfolio unsustainable.”
As part of   the effort to ensure that the debt profile of the country remains sustainable, he said that DMO has completed Debt Data

Reconstruction (DDR) programme for 18 of Nigeria’s 36 States.

According to him, the remaining states would be concluded before the end of 2012 under its five-year strategic plan (2008-2012). The plan, which he said, was developed in 2007, entails capturing the debt portfolio of the 36 States in the Sub-national Debt Management Strategic Objectives and establishing, developing effective institutions and debt management capabilities at the state level.

It also involves maintaining a comprehensive, reliable and efficient national and sub-national debt database so as to ensure prompt and accurate settlement of the debt service obligations.

 

The DMO boss added that in order to ensure that borrowing is not done haphazardly; the organisation has always insisted that all states borrowing money must follow due process of being approved by the legislature and fit into the development plan for the year by the FG, States or their agencies. The debt, he added, must also be sustainable, judging by the prescribed guidelines and framework.

Source: ThisDay