DMO and Mass Reporting

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Ifeanyi Omokwe provides insight into the federal government’s plan to borrow $29.96 billion over a three-year period and DMO’s position on the borrowing plan

Last week, precisely on October 27, some of the country’s print and online media went hysterical that the Debt Management Office, DMO, has ‘kicked against the planned borrowing’ by the federal government.

In what has become a common practice of mass reporting – a situation where one story line is regurgitated as if the different media houses are one franchise – the story trended with just little variations. Journalism is a profession that demands diligence, balance and thoroughness. These can happen only with research and cross checking of ‘facts.’

The Vanguard Newspapers ran with the caption: “FG needs new plan on economy,” while The Guardian reported: “Nigeria can borrow a maximum of $22.8bn in 2017.”

It is trite to state that the Vanguard Newspapers should know that there is already a new economic plan which was elaborated on by the Minister of Finance, Mrs. Kemi Adeosun after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari in September.

Also, if The Guardian had paid close attention to the document which is an annual report usually published in September – 2016 Report of the Annual National Debt Sustainability Analysis – as well as the Federal Government’s three year borrowing plan, it would have spared itself some blushes.

The crux of the matter remains that the federal government’s plan to borrow $29.96 billion over a three year period and what the Debt Management Office report highlighted is the threshold for a single year, 2017.

In the report, the DMO stated that the end-period on Net Present Value (NPV) of the Total Public Debt-to-GDP ratio for 2016 for the Federal Government was projected at 13.5 per cent.

”The maximum amount that can be borrowed (domestic and external) by the Federal Government of Nigeria in 2017, without violating the country-specific threshold, will be $22.08 billion (i.e. 5.89 per cent of 374.95 billion dollars).

”The Debt Management Strategy, 2016-2019 provides for the rebalancing of the debt portfolio from its composition of 84:16 as at the end of December, 2015 to an optimal composition of 60:40 by the end of December, 2019 for domestic to external debts, respectively.
“This policy stance has been reinforced by the recent deterioration in macroeconomic variables, particularly with respect to the rising cost of domestic borrowing.

“Hence, the shift of emphasis to external borrowing would help to reduce debt service burden in the short to medium-term and further create more borrowing space for the private sector in the domestic market.

“Accordingly, for the fiscal year 2017, the maximum amount that can be borrowed is 22.08 billion U.S. dollars and it is proposed to be obtained from both the domestic and external sources as follows:
“New Domestic Borrowing 5.52 billion U.S. dollars (equivalent of about N1.6 triilion) and New External Borrowing: 16.56 billion U.S dollars (equivalent of about N4.8 trillion).”

In making the recommendation, the DMO did not only take into cognizance the absorptive capacity of the domestic debt market but also the options available in the external market.

Before the Paris Debt write-off, debt management in the country was inefficient, complicated and lacked consistency apart from rife corruption. However, with the establishment of the DMO with the requisite personnel and commitment especially over the past few years, it is a plus that the office is reputed for good debt management practices that make positive impact on economic growth and national development, particularly in reducing debt stock and cost of public debt servicing in a manner that saves resources for investment in poverty reduction programs.

The DMO is also saddled with prudent raising of finance to fund government deficits at affordable costs and manageable risks in the medium- and long-term, which in turn is aimed at achieving positive impact on overall macroeconomic management, including monetary and fiscal policies.

It is noteworthy to state that it consciously works to avoid debt crisis and achieving an orderly growth and development of the national economy; and improving the nation’s borrowing capacity and its ability to manage debt efficiently in promoting economic growth and national development.

Therefore, with these enormous responsibility and taking the overall objective of the administration of President Muhammadu Buhari to mobilise funds for massive infrastructural development as never before seen, the media owes Nigerians the duty to put issues in perspective in their reportage and not to cast any agency of government, especially one which over the years has amply demonstrated its commitment to the nation’s growth, for some cherry picking reportage.

Only recently, the Director General of the DMO, Abraham Nwankwo PhD, in a cerebral article; Debt Financing for Economic Recovery: How It Will Work, detailed why, how and what the borrowing of the Federal Government would impact on economic recovery and national growth.

In the article, Nwankwo posited: “Long before the structural collapse of oil export prices in mid-2014, it had been established that Nigeria needed investments of about USD 25 billion per annum for 7 to 10 years to cover its huge infrastructure deficit.

An additional structural financing gap has arisen from the drastic drop of oil revenue; the estimate is that oil-related public revenue has dropped by about USD 20 billion per annum compared to the average in the pre-2014 years. This means that Nigeria’s total investment deficit is not USD25 billion per annum but USD 45 billion per annum.

“What does this simple arithmetic tell us? First, it tells us that given the enormous size of the structural financing gap (SFG), we need to tap capital from all available sources. Therefore, ongoing debates canvassing in favour of one or a limited number of sources and against other sources, are a disservice; they are not helpful. Activities for exploring and exploiting all sources should commence pari passu, even though their realizations and impacts will follow some natural sequence – short-term, medium-term and long-term.”

It is therefore a surprise that with the avalanche of information available, some newspapers will rather settle for sensationalism rather than aim to give a more elaborate explanation of what the kernel of the DMO posited.

Lest we forget, it should be noted that our country’s total debt portfolio rose 30 per cent to $62 billion in 2014, up from $47.6 billion as at September 2013. The country’s external debt stood at $9.52 billion, 15 per cent of the entire debt stock with domestic borrowing accounting for bulk of the total money owed by Africa’s largest economy.
Prior to the 2005 debt relief, bad debt management practices led to the payment of $4.9 billion yearly on debt servicing.

Nwankwo further argued that “The essence of the massive investment plan is that within 5 to 7 years, the country should be moving on a trajectory of sustainable and continuously strengthening economic recovery. And, from about the Year 8 to Year 10, the economy will start generating adequate public revenue, including forex revenue from the export-oriented diversification programme.

That is why the tenor of the new debts should preferably be 15 years and above so that there will be enough time for a “break-even”. Local substitution of food and other eligible items over the next 3 to 4 years will save the country about USD 6-10 billion in foreign exchange.”

The media should engage more and this the DMO has done with several workshops and engagements so that the needed information can easily be made available to guide journalists in informing Nigerians properly and concretely.

– Omokwe wrote in from Newsfront Newspapers, Abuja.