DMO Engages Northern States on Borrowing Processes, Debt Sustainability
Ndubuisi Francis in Abuja
In continuation of its nationwide sensitisation programme, the Debt Management Office (DMO) has mobilised relevant stakeholders and top policy makers in the northern states of the country involved in the borrowing value chain on proper application of extant public finance management laws, and due process while ensuring debt sustainability at the subnational level.
Speaking in Abuja, Tuesday at a one-day workshop on borrowing guidelines, organised for top policy makers from the northern states, under the aegis of the Word Bank-assisted States Action on Business Enabling Reforms (SABER), the DMO Director-General General, Ms. Patience Oniha, underscored the importance of aligning borrowing practices in the states with those of the Federal Government and the existing laws.
DMO’s active engagement of state governments is designed to promote public debt sustainability and adherence to prudent borrowing guidelines.
The primary objective is to ensure that all state-level borrowing is prudent and that overall debt remains within sustainable limits, to avoid potential crises like credit downgrades and the inability to borrow in the future.
Oniha cited laws around borrowing and public debt management, designed to ensure that the process is transparent and the purpose clear.
Such laws, she noted, include the DMO Act and the Fiscal Responsibility Act (FRA) 2007.
According to her, every loan has to be properly documented and should be monitored, as well as reported so that it can be serviced.
The DMO DG explained that when a loan is not serviced, the consequences are not palatable.
“So, that’s when we talk about debt sustainability. If you don’t have a record of what you’re keeping, how will you know what is due, or how will you know when to stop when you have reached a limit?” She asked.
Oniha appreciated all the states that have enacted their own laws on public finance management, describing such legislations as extremely important.
Noting that borrowing is configured with several layers of approvals, she stated that debt managers also needed to understand the importance of such approvals.
According to her, “Debt is such an important fiscal variable that involves several stakeholders, that is why we have a diverse group here.
“The objective is that after this workshop, your collaboration with your different states will be stronger.
“We need to keep empowering people with knowledge about creating skills so that work goes on smoothly.
“How do we make the process work? How do we make the subnational governments understand the process of borrowing so that they can raise the funds that they need for development?
“If they have not understood the process, they cannot comply and they cannot raise the funds.”
She noted that the workshop was designed to equip the states with all the know-how such that each time they are in need of borrowing, the process is seamless and aligns with established guidelines.
“Ultimately, the expectation is that the funds that they raise will be used for development in the state,” Oniha stated.
While applauding the World Bank for demonstrating interest in issues pertaining to public debt management in Nigeria, she said debt is such an important fiscal variable that cannot be relegated to the background.
She added: “We must get it right to make it sustainable.
“You can see what has happened to countries that have had to restructure their debts, the problems they went through; the downgrading by the international debt rating agencies; and their inability to borrow.
“Because debt is important, there are laws around borrowing. You want the borrowing process to be transparent, so it is not just one person that took the decision.
“The purpose has to be clear; the loan has to be properly documented; it should be monitored, it should be reported so that you can service it.
“When you do not service it, the consequences are not good. So, let us talk about debt sustainability. How will you know what to do? How will you know when to stop?”
In her remarks, the acting Head of Service, Federal Capital Territory (FCT), Mrs. Nancy Nathan, said the workshop was aimed at demystifying the borrowing process and clarify documentation requirements, empowering top policy makers to make informed decisions that will ultimately enhance the capacity to meet the financing needs of respective states.
“As we embark on this journey of learning and collaboration, let us engage openly, as the DG has said, share our insights and forge pathways that will drive our collective success.
“Together, we can ensure the borrowing strategies are not only effective, but also sustainable, fostering growth and prosperity for all and the generation to come.
“This workshop is aimed to demystify the borrowing process and clarify documentation requirements.
“It will empower our top policymakers to make informed decisions that will ultimately enhance our capacity to meet the financial needs of our respective states.
“As we embark on this journey of learning and collaboration, let us engage openly, share our insights, and push past limits that will drive our collective success.”
According to her, the workshop was a meeting point between opportunity and responsibility, adding that it was tied to equipping states and the FCT with the knowledge and tools necessary to navigate the complexities of the borrowing process.
She explained that in a rapidly evolving economic landscape, access to finance was not just a necessity, but a critical enabler for development.
The World Bank-supported SABER Programme is the successor of the now-rested States Fiscal, Transparency, Accountability and Transparency (SFTAS) programme, another World Bank-assisted initiative under the previous administration.
