The DMO and Buhari’s Job Plan

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Wale Suleiman

Ask the person next to you who is the Director General of the Debt Management Office, DMO, or what the agency does, and you’re sure to get a blank stare as answer. But ask who is the head of the Nigerian Customs Service or the Federal Inland Revenue Services, and the answer pops up before you blink an eye.

Yet the DMO, just like these other agencies, is also under the supervision of the Ministry of Finance. But while the Customs and the FIRS are revenue generating agencies, raking in billions of naira annually for government, the DMO is saddled with the task of managing the country’s debts and ensuring a debt servicing regime that is healthy for the Nigerian economy.

Due to its highly technical functions, and because it doesn’t bring in physical cash, the DMO is understandably under the radar and not many are aware of what it does. Yet, it is also a revenue earner for the country in a peculiar and unique way.

Our country faces a different threat- an economy in recession and increasing loss of jobs. The country is faced with a shrinking business environment where even industry giants are thinking of relocating their businesses. In the past one year, the construction industry has thrown more than 5000 workers into the job market. The manufacturing sector had long lost steam while the service sector is daily laying off staff.

This is the background from which I see recent strategic intervention of the DMO by way of tinkering with the country’s borrowing template to reflect the urgency required to halt economic recession, halt further loss of jobs and create more jobs. And the strategy is to mobilise external funds into the country to help the private sector grow the economy.

Dr. Abraham Nwankwo, DG of the DMO, said recently that his office expects to raise $1 billion from the Eurobond market by middle of December this year. It is part of the country’s plan to borrow a total of N1.8 trillion from abroad and at home to fund an expected budget deficit of N2.2 trillion this year.

Last week, Reuters reported that the DMO launched a one-week roadshow to Britain and the United States to promote $1 billion Eurobond issue to investors in those countries. The finance minister, Kemi Adeosun, appeared at the roadshow.

The debt office said it would auction between 90-120-billion-naira worth of bonds maturing in 2021, 70-100 billion naira in the debt maturing in 2026 and 90-120-billion-naira worth in the paper maturing in 2036.

The DMO is also seeking the services of international and Nigerian law firms as joint legal advisers for the federal government Medium Term Note Programme (2016-2018). The legal advisers will be appointed separately by the Federal government.
This was contained in a notice of request for proposal on the website of the DMO, which said the purpose of the FGMTN programme was “to enable the federal government have the flexibility of quickly taking advantage of favourable market conditions in the International Capital Market (ICM) to raise funds, if and only when the need arises”.

The DMO’s decision to focus more on foreign debt is no doubt a strategic initiative to give the Nigerian economy a quick leap from its current recession. It also represents a new thinking that external borrowing will provide needed funds for the private sector to sustain local industries, thereby creating more employment and halting further domestic job loss.

The DMO under Nwnakwo, pursuing a remarkably sound economic logic, adjusted the borrowing template of the past to reflect current dynamics. The previous formula of 84 percent domestic borrowing to 16 percent external borrowing as now been slightly adjusted to a new ratio of 60:40 to reflect current realities.

Dr Nwankwo revealed during one of his rare Press Conferences, in June, that domestic borrowing has been found to be more expensive while foreign funds come cheaper. He said this was the logic that informed the new borrowing template. Now, aside the gain in external borrowing, the plan would also encourage private sector investments in the economy. If you borrow from domestic investors, you are taking away money from the private sector, a sector that is expected to spearhead the job creation plans of the President Muhammadu Buhari administration.

This is why I think the DMO deserves commendation for thinking out of the box and refusing to be stock in old unproductive ways. This is exactly why many public commentators have asked Buhari to bring more economic experts on board, people who have the skills to think the country out of recession.

The President last week sent a 3-year Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP, to the National Assembly, ahead of the 2017 budget.
The letter pointed out that the documents were designed against the backdrop of an adverse global economic environment, and would provide the framework for the development of 2017 budget, and of course, budgets for the next three years.

Speaking earlier on the plan, which surely depends on a borrowing plan that favours external debt, Dr. Nwankwo said that over the next four years, the country would pursue a debt management strategy that takes into account the fact that Nigeria’s public debt portfolio is dominated by domestic debt.

Although it was a deliberate action to grow the local bond market after the country exited the Paris and London Club between 2004 and 2006, Dr. Nwankwo noted that the country was facing new realities. Moreover, the previous borrowing plan has successfully developed the domestic bond market, and now it was time to look for cheaper funds. Proceeds of the external borrowings, according to Nwankwo, would be devoted to capital expenditure.

Thus if the Buhari administration is to fulfil its plan for economic diversification and creation of jobs, the current synergy on policy and purpose that is noticeable among economic agencies of government must continue with increased momentum.

The seamless way the DMO has keyed into the economic diversification policy of the government is highly commendable. And nothing indicates this more than the new borrowing template, which experts agree, is already yielding positive results.
There is little wonder why other African countries are eager to learn from Nigeria’s Debt Management Office.
––Suleiman wrote in from Ilorin