By Ogunsola Oke:
In order to arrive at a fair and impassioned appraisal of the achievements and challenges of the Debt Management Office (DMO) under the guidance of Dr. Abraham Nwankwo, it is pertinent to summarize the status report of the management of the nation’s debt prior to the establishment of the Debt Management Office (DMO) in October 2000. Before then, the management of our national debt was characterized by systematic and structural deficiencies.
In practice, debt management functions were split across several government departments including the Federal Ministry of Finance, the Office of the Accountant General of the Federation and the Central Bank of Nigeria. This multi-dimensional approach was laden with problems and shortcomings which included operational inefficiencies and poor coordination, inadequate debt data recording system and poor information flow across agencies resulting in inaccurate and incomplete loan records which gave rise to difficulties in the verification of creditors’ claims arising from conflicting figures from various bodies handling the debt management function.
The policy underpinning which gave rise to the establishment of Debt Management Office (DMO) in 2000 centralizing the nation’s debt management functions with the statutory mandate of maintaining comprehensive, accurate and timely records of the nation’s debts, prudent management of the debt portfolio and negotiating with and ensuring debt relief from creditors has brought sanity into the system.
The emergence of Dr. Abraham Nwankwo at the helm of DMO on July 1 2007 almost coincided with the final exit of Nigeria from both the Paris and London club debts in 2006. Before then, our external debts had remained unsustainable as a result of the crushing debt burden arising from the external debt over hang. Following the exit from both Paris and London club debts, our external debt fell from an all-time high of about $35 billion in 2004 with an external debt-to-GDP ratio of over 40 percent to about 3.5 billion in 2006 and an external debt-to-GDP ratio of 2.3 percent respectively.
Although several macroeconomic problems and challenges remained, the debt relief and emergence of Dr. Nwankwo afforded the nation the opportunity for a fresh beginning. Given his solid academic background and position as one of the pioneer management staff of DMO, having joined the agency in 2001, Nwankwo was strategically positioned to lead the charge in the ongoing transformation of the capital market and under his leadership, the Debt Management Office has continued to play a pivotal role in the repositioning, strengthening and resuscitation of the FGN Bond Market.
Under his guidance, DMO has relentlessly pursued the realization of its statutory mandate and has recorded verifiable achievements, making it the pride of the nation across Africa and the world. Some of its stellar performance include the formulation of a National Debt Management Framework (NDMF), 2008-2012, a review of same and publication of the revised (2nd) NDMF, 2013-2017 which incorporated debt management policies and guidelines.
In addition to the maintenance of an accurate and up to date data which are published periodically, DMO has ensured regular and timely servicing of government’s debt. As a result of the adoption of sound practices in public debt management, DMO has continued to conduct an annual Debt Sustainability Analysis (DSA) and has successfully prepared a Medium Term Debt Management Strategy (MTDS), 2012-2015 which is being implemented.
One of the key objectives of (MTDS) is to achieve optimal composition of external and domestic debt structure and to ensure low cost of government debt consistent with a prudent level of risk. Given the impact DMO has continued to make on our economic landscape, it is safe to posit that the highlighted plethora of initiatives have been pivotal in strengthening the capacity and tenacity of our socio-economic fabric to withstand the impact of global economic meltdown. The centrality of the private sector as the main driver of the national economy is not lost on DMO under Dr. Abraham Nwankwo as it has continued to roll out many private sector support initiatives.
It has consistently promoted policies to encourage the creation of opportunities for private sector access to long term capital in both domestic and international capital markets in order to sustain and expand their businesses. Determined to facilitate access to the International Capital Market for Nigerian corporate players, DMO issued USD 500 million Sovereign Eurobond in 2011 and followed it up with a whopping USD 1 billion dual-tranche Eurobonds in July 2013; thus creating benchmarks for corporate borrowers. In 2014, DMO issued FGN Bonds in Global Depository Note (GDN) format for the first time aimed at diversifying the investor base and attract foreign investors to the domestic securities Market.
As a result of strong leadership and profound impact, the DMO under the present leadership has continued to make to ensure prudent management of resources and the adoption of sound public debt management practices at all levels of governance, states across the nation are beginning to feel the positive impact of its activities.
Having successfully demonstrated its determination to ensure a paradigm shift in government business by developing a template for the establishment of Debt Management Departments (DMDs) which include outline of the legal institutional human resource framework, all the 36 States including the federal capital territory (FCT) have established Debt Management Departments (DMDs) in conjunction with the agency. As a result of the creation of domestic debt data bases for the states and FCT by DMO, Debt Data Reconstruction exercises have been conducted in all the 36 states and the FCT. This programme assists states with the compilation, recording, analyzing and reporting of debt data. This has led to the institutionalization of a framework for the periodic rendition of the Domestic Debt Data by the states and FCT to the DMO.
With these remarkable achievements under its belt and given its relentless quest for excellence, DMO has played a pivotal role in managing and restructuring the debt of cash strapped states in the country as a result of their failure to meet their financial obligations. Following the announcement of a bailout package for the states by president Buhari, 22 states applied to DMO for their debts to be re-structured into Federal Government of Nigeria Bonds. Whereupon, DMO has successfully concluded the restructuring of N322.788 billion short term commercial bank debts of 11 states out of the 22 states to long term domestic bond at 14.83 percent yield in 20 years. Fourteen banks were involved in the phase 1 of the state’s debt restructuring exercise involving 11 States. These successful restructuring was effected using a re-opening of the FGN Bond issued on July 18, 2014 which will mature on July 18, 2034.
As the chief visioner and the mastermind driving the knowledge based revolution at the Debt Management Office, Abraham Nwankwo has put in place a framework that ensures continuous capacity building for staff. Through several workshops and special training for staff across board, he has consistently repositioned the agency for greater productivity pursuant to the realization of its statutory mandate. Debt sustainability, analysis training, sensitization workshops and training programmes aimed at achieving accurate, reliable and timely domestic debt data submissions have been conducted for relevant States, Ministries, Departments and Agencies (MDAs) by DMO. As a result of the intensification of sensitization of relevant stakeholders including banks and other regulatory organs responsible for controlling borrowing by states, banks and other regulatory authorities now revert to the Federal Ministry of Finance before granting loans or facilities to states.
The giant strides and remarkable progress recorded by DMO under the guidance of Abraham Nwankwo has not gone unnoticed by major players within the African continent and beyond. Under the present management, DMO has transformed from being a user of technical assistance to being a provider to some nations across Africa as the leadership of these nations in recognition of DMO’s technical competence now seek to expand on areas of cooperation.
So far, four African countries including Uganda, Sudan, Zambia and Zimbabwe have benefited from DMO’s technical competence. Predictably, the grant strides recorded by it have won for it plaudits, recognitions and awards both within and outside the shores of this country.
In 2014, it was awarded the prestigious Europe, the Middle East and Africa (EMEA) Finance Award for the Best Sovereign Bond in Africa in 2013, for the US$ 1 billion Eurobonds which was successfully issued by Nigeria in July, 2013. Although challenges and constraints remain which include the increasing cost of domestic borrowing, non-existence of a sinking fund for redeeming maturing obligations due to budgetary constraints, DMO has recorded string of achievements which has transformed it into a well-respected institution in Nigeria and beyond.
Oke, a Financial analyst wrote in from Lagos