The Debt Management Office (DMO) on Monday said that the Federal government of Nigeria has relied on debt to finance over 90 percent of deficits contained in its annual Appropriation Acts.
Patience Oniha, director general DMO, who disclosed this on Monday also informed that public debt was instrumental in helping Nigeria bounce back from the recession caused by economic shocks which put a strain on the country’s revenue.
Speaking at the Executive Leadership Workshop organised for Senate Committee on Local and Foreign Debts and House Committee on Aids, Loans and Debt Management in Niger State, Oniha however, said the government understands the need for caution when borrowing, especially with mounting public debt and rapidly increasing debt service obligations.
“It is true that the public debt has been growing. We should remember that Nigeria has witnessed economic shocks with major impacts on revenue that have resulted in recession twice and borrowing was a major tool for reversing the trends.
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“However, going forward, there should be a strong emphasis on revenue generation from multiple sources other than crude oil to ensure that debt is sustainable”, she explained.
According to her, those initiatives that have been introduced to finance capital projects through Public-Private Partnerships should be sustained to curtail the need for direct borrowing by the Government to fund infrastructure projects.
Speaking further, the DG said the DMO successfully developed the domestic fixed-income security market which has created access for Nigerian corporates in the international capital market through products such as Nigerian Treasury bills, FGN bonds, Savings bonds, Sukuk, Green bonds, Eurobonds, and Diaspora bonds.
She informed that since 2017, when the DMO started issuing Sukuk on behalf of the federal government, over N365 billion proceeds have been realised in the issuances, while over $12 million worth of Eurobond has been issued since 2011.
The DG said the workshop was being organised for lawmakers to broaden their knowledge on borrowings – how it is done and why it is done.
” Public debt and debt management are at the interest of the public at large, and because the National Assembly has the power as contained in the DMO Act and the Fiscal Responsibility Act to approve those borrowings, it only means they should be knowledgeable about debt; how we borrow and what type of instruments we borrow, and to know about the levels of debt stock so that when requests are made to them to approve new borrowings, they have an understanding of it.
“This will make them better informed and also help us improve on our work,” she said.
According to Oniha, 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.”
“The DMO recognises that borrowing should be done with caution to meet developmental and sometimes, social needs and that proceeds are deployed judiciously,” she stressed.
In his keynote address, Clifford Ordia, Senate Committee Chairman on Local and Foreign Debts, said debt is a veritable tool for economic growth and development if properly managed.
He added that effective debt management that emphasizes transparency, due process, and fiscal discipline can precipitate a turnaround in the economy.
Ordia assured that the committee is poised to have a thorough look at the Debt Management Office 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 Government to streamline projects that loans can be obtained.
“As a Committee, we will give priority to projects that will develop human capital and critical infrastructure that has the potential to generate revenue and create employment”, he assured.
The chairman further urged the government to, as a matter of policy, reintroduce the concept of monitoring and evaluation in the planning and implementation of projects and programmes, noting that the absence of policy has led to a colossal waste of resources evidenced by the number of abandoned projects.
To enhance oversight by Legislators, Ordia said lawmakers must be involved through relevant committees in the negotiation of loans.
A participant, Senator George Thompson who represents Rivers East Senatorial District said the workshop would help build a cordial relationship between Legislators, particularly the committee and the DMO.
According to him, one of the missing links between the National Assembly and DMO is a poor understanding of DMO functions or mandates as it relates to debt management.
He said: “I believe that we have benefitted from this workshop. We have understood their mandate. It has given us a good background when discussing another borrowing plan, will be able to know what it means borrowing funds.
“There is fiscal policy of financial management and monetary policy of financial management, we did not know the difference, but we have a better understanding. This workshop will also enhance a better relationship between the DMO and the committee taking oversight on them.”
On his part, Kolawole Lawal representing Egbado South/Ipokia constituency advocated for a legal framework to ensure that those that are involved in borrowing are part of the monitoring and evaluation process.
Despite public concerns on borrowings, Lawal said Nigeria’s debt stock is not yet a burden because the country is still below the threshold at over 21 percent while the world Bank recommendation is over 55 percent.
He also commended the workshop saying it will enhance the relationship and better understanding between the DMO and the national assembly.
