The Debt Management Office (DMO) on Wednesday held talks with the 36 states on a legal framework that would guide debt management operations at the sub-national level.
The debt framework comes under the States Fiscal Transparency, Accountability and Sustainability (SFTAS) programme, which is a collaboration between the World Bank, the Federal Government of Nigeria and the 36 state governments, with the DMO as one of the implementing agencies.
Under the SFTAS programme, the DMO is responsible for implementing three of the mandates, all of which are debt-related.
At a virtual workshop organised by the Debt Management Office (DMO) to present the ‘Guidelines for the Legal Framework for States’, Patience Oniha, DMO director-general said the meeting was a key step to achieving the Disbursement-Linked Indicator (DLI) 7 on, “Strengthened public debt management and fiscal responsibility framework.”
This DLI requires states to have robust state-level legislations which incorporate amongst others; responsibilities for contracting State debt, recording and reporting State debt, as well as, fiscal and debt rules and/or limits.
As at December 2020, Nigeria’s public debt stock totalled some N33 trillion out of which states and the Federal Capital Territory jointly accumulated over N6 trillion.
The DMO had several years ago entered into a partnership with state governments and Federal Capital Territory on a number of debt management initiatives including capacity building, debt data capturing and legislations.
The SFTAS programme has raised these initiatives, improved the level of commitment, and, brought a sense of urgency to improve public debt management at the sub-national level.
“Overall, the outcome is a strong positive,” Oniha stated.
She said although there are provisions in the fiscal responsibility act which guides states’ borrowing, and passes through the minister of finance and the DMO as the technical advisers, the proposed law would drive reforms in debt management and improve overall fiscal sustainability at the sub-national level.
She said one of the SFTAS targets which was the purpose of the workshop is to ensure that states have equivalent debt management law like the DMO Act which governs debt activities at the centre.
“If states have those laws, it means they have institutions, the functions of the institutions, the borrowing rules and relationships even though those are governed largely by the fiscal responsibility act.
She explained that the new components that will be incorporated in the law include debt sustainability analysis and the medium-term debt management strategy which states were not doing before.
“We needed to tell the states what the law must necessarily include, one of them which is for instance who has authority to borrow, what is the process for borrowing and what is the limit,” Oniha explained.
She confirmed that so far, twenty-three States have already enacted laws and Fiscal Frameworks in their respective States and by extension earned the SFTAS World Bank grant associated with this DLI 7 and that the DMO is committed to ensuring that the remaining thirteen States meet this requirement.
“We expect that States will have a clear understanding of the guidelines and requirements of Debt Legislation and the Institutional Frameworks required for efficient debt management operations, whose ultimate objective, is to ensure that borrowing is prudent and that debt is sustainable,” the DG explained.
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