DMO: Funds for Debt Service Obligations Not Released to Us

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By Ndubuisi Francis

The Debt Management Office (DMO) has explained that the provisions in the annual appropriation acts for debt service are solely dedicated for such payments only, which include the repayment of principal, interest and other charges for both domestic and external debt.

The debt management agency clarified that allocations for debt service obligations are never released to it for spending, adding that in line with the mandate of the Office of the Accountant-General of the Federation (OAGF), the funds are domiciled with the OAGF, who on the advice of the DMO, effects payments directly to the creditors as at when due.

Such creditors, it noted, include multilateral and bilateral lenders like the World Bank, African Development Bank, Exim Bank of China, investors in Nigeria’s Eurobonds, as well as investors in securities issued in the domestic market such as FGN Bonds, SUKUK, Green Bonds and Nigerian Treasury Bills.

The agency said its clarifications became necessary due to allegations by some media outlets that the DMO was unable to account for the N2.2 trillion allocation to it in the 2018 Appropriation Act.

In a statement issued Tuesday, it said the allegations were not only false and unfounded, but extremely misleading.

The statement said: “The media outlets made the statement following the DMO’s appearance at the hearing of the Public Accounts Committee of the House of Representatives on Friday, February 26, 2021.

“At the session, the committee enquired about the utilisation of the N2.2 trillion provided in the 2018 Appropriation Act; of which N2.1 trillion was allocated for Debt Service and the DMO’s appropriation of N721,251,798.00, making it N2.2 trillion.”

According to the DMO, it explained to the Public Accounts Committee that the N2.2 trillion was not available as the DMO’s total allocation since N2.1 trillion was specifically meant for servicing of Nigeria’s domestic and external debt.

It added that this explains why debt service is expressly stated as a separate line item in the annual Appropriation Acts, while the DMO’s expenditure is equally listed separately.

“The DMO wishes to emphasise that the provisions in the Annual Appropriation Acts for Debt Service, including the 2018 Appropriation Act, are dedicated for Debt Service payments only; that is, for the repayment of Principal, Interest and Other Charges for both Domestic and External Debt.

“Indeed, the funds for Debt Service are never released to the DMO for spending, rather, in line with the mandate of the Office of the Accountant-General of the Federation (OAGF), the funds are domiciled with the OAGF, who on the advice of the DMO, effects payments directly to the creditors as at when due,” the statement observed.

The DMO urged the public to note that servicing of the public debt is absolutely necessary to ensure that Nigeria remains credit-worthy and retains or improves on its sovereign rating, which ultimately, will support growth and development.

It stressed that it is for this reason, as well as transparency purposes, that debt service is expressly provided as a line item in the Annual Appropriation Acts.