The emergence of Ms. Patients Oniha as the new Director-General, Debt Management Office (DMO) is coming at a time Nigeria’s rising debt profile is raising concerns. Ndubuisi Francis outlines the areas where her focus should be
Since her appointment last weekend as the DG of DMO, those whose pastime is to criticise such appointments, often from altruistic, narrow, selfish or clannish interest have so far not raised any eyebrow.
Perhaps, this is because her pedigree has proved to all that she is a square peg in a square hole.
The DMO is saddled with the task of managing Nigeria’s debt – both federal and sub-national.
The ten-year tenure of her predecessor, Dr. Abraham Nwankwo, love or loathe him, has been adjudged as one that was characterized by many remarkable achievements.
The Edo State-born Oniha, who took over from Nwankwo, is a highly experienced banker and chartered accountant. The new DG, with over 30 years experience in the financial sector, had worked with Ecobank Nigeria, Standard Chartered Bank, and KPMG, among others.
Oniha retired as a director in the DMO, served in the Efficiency Unit of the Ministry of Finance before her latest appointment as the DMO chief executive.
She is seen as part of the success story the DMO recorded in the past 10 years.
During that period, DMO scored a number of firsts in its operational efforts to manage the country’s debt profile. These include the establishment of 37 sub-national Debt Management Departments for the 36 states and the FCT, culminating in the construction of the first-ever comprehensive and reliable Domestic Debt Database for all the states and the FCT in 2012.
Other achievements included putting in place Primary Dealing-Market Making (PDMM) system for the FGN Bonds, enabling two-way quotes in the trading of FGN Bonds and, therefore, the introduction of a vibrant and liquid Secondary Market for FGN Bonds; listing of FGN Bonds on the Nigerian Stock Exchange.
The DMO also ensured the inclusion of Nigeria’s Sovereign Bond in Global Market Indices, the JP Morgan Index and the Barclays Capital Index; issuing of Nigeria’s Eurobond in the International Capital Market and its listing and trading on the London Stock Exchange; issuing of Nigeria’s Sovereign Retail Bonds, the FGN Savings Bond and listing on the Nigerian Stock Exchange and on the FMDQ OTC Exchange.
The achievements also included issuing of Nigeria’s Diaspora Bond and the first-ever registration of Nigeria to access the United States financial market under the stringent U.S. Securities and Exchange Commission rules and regulations; designing and implementing Nigeria’s National Debt Management Framework; introducing the soon-to-be launched first-ever Nigeria’s Sovereign Non-Interest Bearing Bond, the Sukuk, as well as exporting of Public Debt Management services through capacity-building support to other African countries, including the Sudan, Zimbabwe, South Sudan, Kenya and Uganda.
With her background, it is important to put her to task in some of the areas of urgent attention.
The Burgeoning Debt
In recent times, Nigeria’s burgeoning debt profile has become a source of apprehension among Nigerians.
That concern is understandable: Nigeria had in 2006 exited a $30 billion debt conundrum by the London and Paris Club of creditors.
For, many Nigerians, they had wished that Nigeria never relapsed into that era.
But for a developing economy that almost entirely depends on crude oil whose price has witnessed a precipitous slide, a country with a low tax-to-GDP revenue, that would amount to wishful thinking.
But many who understand the dynamics of managing an economy, especially one under recession, they call moderation and caution on the borrowing limit.
As at the end of March, 2017, the DMO put Nigeria’s total debt at N19.16 trillion, both domestic and external.
DMO scored a number of firsts in its operational efforts to manage the country’s debt profile. These include the establishment of 37 sub-national Debt Management Departments for the 36 states and the FCT, culminating in the construction of the first-ever comprehensive and reliable Domestic Debt Database for all the states and the FCT in 2012. She would be expected to build on that achievement.
Taking Heed of Debt Sustainability
The International Monetary Fund (IMF) recently stated in its World Economic and Financial Surveys that Nigeria’s indebtedness will climb to 24.1 per cent of its Gross Domestic Product (GDP) by 2018.
The IMF also projected that by the end of 2017, the country’s current indebtedness would have reached 23.3 per cent of the GDP.
Nigeria had closed 2016 with a debt-to-GDP ratio of 18.6 per cent. By the end of 2015, its debt-to-GDP ratio stood at 12.1 per cent, according to the Bretton Wood institution.
According to the National Bureau of Statistics (NBS), for the year ended December 31, 2016, national debt stood at N67.98 trillion.
To put it into context, going by the projection of IMF’s 24.1 per cent for 2018, within three years, the nation’s debt-to-GDP ratio would have soared by 100 per cent, from 12.1 per cent in 2015 to 24.1 per cent in 2018
Although analysts believe that Nigeria’s debt-to-GDP ratio is among the lowest in Africa, many fret over speed of debt accumulation in recent years. Yet, some are bothered by the quality and utilisation of debts by the nation.
A total of N1.84 trillion was provided for in the 2017 budget for debt servicing.
The 2017 Budget is anchored on an overall projected fiscal deficit of N2.36 trillion which is about 2.18 per cent of GDP, and within the threshold prescribed by the Fiscal Responsibility Act (FRA). The budget deficit is to be financed mainly by borrowing, which is projected at N2.3 trillion.
Of this amount, N1.07 trillion (46 per cent) of the amount is to be sourced externally while N1.25 trillion is to be borrowed domestically.
The debt-to-service revenue ratio in the 2017 Budget is projected to be about 32.7 per cent.
To look more closely at the figures in the budget, a whopping N1.66 trillion is for debt service while N177.46 billion is set aside in the sinking fund to retire maturing bonds.
The federal government had only on Tuesday disclosed that it borrowed N3.57 trillion between June 2015 and March 2017 to finance budget deficits.
The World Bank recently expressed concern over the debt payment to revenue ratio, saying that reduced revenue earnings might render the country’s debt unsustainable.
The Senior Economist at the Nigeria Country office of World Bank, Yue Man Lee, said for the interest payment to be sustainable, the country either had to increase its revenues or work towards balancing the debt profile.
Her words: “Nigeria’s debt to GDP ratio is relatively low. What is of concern is the ratio of interest payment to revenue. That is what is concerning. This reflects the fact that there has been a massive drop in revenues because of drop in oil revenues.
“There are two main strategies to reduce this debt burden. One is to increase the revenues. Here, in order not to be vulnerable to the volatility of the oil sector, the critical thing is to increase the non-oil revenues – the VAT, the income taxes and the excises outside of oil. This is something we have been discussing with the government about.”
There is no doubt that the fall in oil prices has led to a spike increased borrowing, but the concerns raised by the Breton Wood institutions are instructive.
As the nation’s adviser-in-chief on debt matters. Oniha should be conscious of the concerns expressed by Nigerians and multilateral institutions on the debt challenge.
The various states of the federation who made frivolous borrowing a pastime in recent years should be told in no mistaken terms that the party is over any time they seek the approval of the DMO for either domestic or external loans that have no serious bearing on economic development.
This is no time to defer to anyone or pander to the dictates of any.
The DMO should consistently look at the nation’s Debt Sustainability Analysis (DSA).
Extending DMO’s Technical Competence to Other Nations
In spite of human foibles, the tenure of Abraham Nwankwo was an era of remarkable progress, which did not go unnoticed by major players within and outside the African continent.
The DMO has moved from being a user of technical assistance to that of a remitter of such assistance to some African countries.
In recognition of DMO’s technical competence, many of them seek to expand areas of cooperation.
At the last count, no fewer than four African countries, such as Zambia, Zimbabwe, Uganda, and Sudan have benefited from DMO’s technical competence.
Oniha should build on this. It could be a window of foreign exchange earner.
Setting up a Strong Communication Dept
While the Nwankwo era may have recorded sterling performances in many areas, the DMO’s communication machinery under him was appalling. The tenure marked a study in how not to relate with the media.
An agency like the DMO lacks a functional media unit with professional communicators, who know the value of information dissemination. Oniha should immediately set up a fully digital age and operational media department that is manned by experienced communicators, particularly at this time that the nation’s debt situation is generating more interest.
Besides, she should be accessible. By this, I mean willing to provide information when needed by the media and other Nigerians.