The Nigerian Debt Management Office, (DMO)
touted as a model in Africa, has become a major destination for out-sourced
debt management skills and services in nearly two decades of its existence.
The DMO under the leadership of Dr. Abraham
Nwankwo has been galvanized to become a leading player in Sub-Sahara Africa.
And the achievements it has recorded so far has earned it many accolades from
renowned global institutions, as it has become a one-stop-shop for effective
public debt management.
It would be recalled that the DMO resuscitated
the Domestic Bond Market in 2003 when it first issued FGN Bonds. This
landmark achievement was intended to restructure the Government’s domestic
borrowing which was predominantly short term and to develop. the
domestic bond market which had been
moribund for about 20 years. To achieve
these objectives, the DMO in collaboration
with other stakeholders introduced several Measures to
deepen the market amongst which are: regular and transparent FGN Bond Auctions;
the appointment of dedicated market makers known as Primary Dealer Market
Makers to support the Bond Auctions and
ensure an active Secondary Market; a Two
Way Quote based market; existence of Benchmark Bonds;
a Sovereign Yield Curve Extending to 20 years and, a
diversified domestic investor base.
In essence, a strong and well
established domestic bond market had been
developed through inherent local capacity without any foreign
facilitation.
Based on the achievement of the DMO, the
Nigerian Bond Market received international recognitions through the inclusion
of FGN Bonds in Global Bond Indices. The inclusions were recognition that
Nigeria was one of the few emerging market countries with a robust domestic
bond market. Thus, FGN Bonds were included in J P Morgan’s GBI – EM (October,
2012) and Barclays Capital’s Emerging Markets – Local Currency Bond Index
(March, 2013).
Since these awards came
after the Nigerian Bond Market had
been developed, it follows therefore, that
they were recognitions for achievements already
recorded rather than pre-requisites for the development of the market.
It is important to note
that Nigeria became the only African
country after South Africa to be included
in the GBI – EM and also that there are
several other emerging market countries such as Venezuela whose domestic
Bonds are not included in any international Bond Index. Their non-inclusion has
not limited their markets or economies.
Notwithstanding the benefits of the inclusion of
FGN Bonds in the GBI – EM, the DMO continued to introduce measures to attract
more domestic investors to the Bond market particularly, non-bank institutions
and retail investors in order to enlarge and diversify the Nigerian economy.
Despite the delisting of FGN Bonds from J P
Morgan, the Director General of the Debt Management Office, Dr. Abraham Nwankwo
insisted that the Nigerian economy remains on a growing path, arguing that the
country is operating at near full unemployment of its resources. This, he said
leaves the country with all the potentials for real growth.
He also said a country like Nigeria that is yet
to tap into its huge solid mineral resources and a well fallowed agriculture
sector, then the potential for growth is incalculable.
According to him Nigeria had its own Bond Market
before JP Morgan ventured in, and that the Nigerian Bond market has been developing
before they joined and that their exit mean little or nothing to the existence
of the FGN Bond Market.
Nigeria’s economy has been described as one of
the most attractive investment destinations in the emerging markets despite the
headwind blowing across most oil producing nations since 2014, and according
Nwankwo, the country’s economy will be attractive to investors all the time
because Nigeria is still a virgin and a great place for both local and foreign
investors.
Since its inception in 2000, the DMO which was
primarily established to centrally coordinate the country’s debt has attracted
the interest of a host of African countries including Uganda, Sudan, Zambia,
Zimbabwe, Kenya and recently South Sudan, to learn Nigeria’s experience in
public debt management.
Coming at a time when their country was battling
with stifling foreign and local debt, it was inevitable that the attention of
the world was glued to the DMO having saved Nigeria from its debt crises and
for the unprecedented success of the FGN Bond Market, particularly in reducing
debt stock and cost of public debt servicing in a manner that saves resources
for investment in poverty reduction programs.
Back in 2006, Uganda came on a study tour to
Nigeria on two occasions, when a delegation came to learn from the DMO model as
a basis for institutional arrangement.
In its Desire to further developing of its bond
market alongside building strategic alliances, the Bank of Uganda also sought
to engage Nigeria’s Debt Management Office (DMO), in its capacity as a
frontline regulator for all secondary market activities and a platform provider
for the efficient listing, quoting and trading of bonds. Whilst acknowledging
the impact of the DMO in the Nigerian financial market landscape, with emphasis
on technology as a key enabler of its activities, the representatives noted
that effective collaboration with other domestic and international financial
market infrastructures such as DMO will serve to foster active market
development in the Ugandan financial market and encourage cross-border capacity
building.
Sudan also came on a study tour to Nigeria on
two occasions. The first delegation came in December 12-16, 2005 to learn the
workings of the DMO and its interface with stakeholders.
Similarly, another delegation from the External
Debt Management Unit in the Central Bank of Sudan and Domestic Debt Unit in the
Ministry of Finance of Sudan, visited the DMO for a month secondment programme
from Monday, June 23 -Tuesday July 15, 2014 to learn from the Nigeria’s debt
relief and restructuring phases as well as Nigeria’s debt management
experiences prior to the establishment of the DMO.
Another instance, was a visit by: A delegation
from the Ministry of Finance and National Planning of the Republic of Zambia,
who undertook a one-week study tour of the Debt Management Office, Nigeria,
from 20th – 24th September, 2009. The purpose of the study tour was to enable
the Zambians learn how the Debt Management Office, Nigeria is structured, the
functions of the Office and how it carries out its responsibilities of managing
the country’s public debt and issuance of the FGN Bonds.
If that was not enough, A seven man team from
the Zimbabwe Aid & Debt Management Office (ZADMO) in the Ministry of
Finance of Zimbabwe visited the DMO for a week study tour from July 17 to 27,
2011 to understudy the processes of establishing and running an effective debt
management office in its efforts to set up a centre of excellence in debt
management in Zimbabwe.
The World Bank (WB) in August requested the DMO
to host a delegation of Kenyan Officials from Kenya’s Central Bank, Capital
Market Authority, and National Treasury & Debt Management Office on a Study
Tour of the Nigerian Domestic Bond Market.
The main purpose of the Study Tour is for the
delegation to gain insight into the developmental initiatives undertaken by the
DMO which have led to the remarkable growth and development of Nigeria’s
Domestic Bond Market, considering the fact that up until 2003, when the DMO
floated the 1st Federal Government of Nigeria (FGN) Bonds, the FGN Bond Market
which is the pivot for the domestic bond market was in comatose for about two
(2) decades.
The Kenyan delegation centered their interest on
Formulation of Issuance Strategies for Securities, Policies for Benchmark
Building, Primary Dealer Market Maker Programme, Communication Strategies with
market stakeholders, Price formation and dissemination in the Primary and
Secondary markets, Types of secondary market, Architecture, price discovery and
transparency.
In accordance with the global recognition of the
effectiveness of the DMO, on Tuesday, November 30th 2015, a seven-man team from
the Ministry of Finance and Economic Planning (MOFEP) of the Republic of South
Sudan came on a 5-day Study Tour of the Debt Management Office to understudy
the DMO and gain insight into the developmental initiatives undertaken by the
DMO which have led to the remarkable growth and development of Nigeria’s Debt
Management Office, which has earned it, its global recognition.
Speaking on the objectives of their visit to the
country, the Director General, Directorate of Macroeconomic Planning, Philip
Ajack Boldit, who led the delegation, said South Sudan was keen to learning the
various strategic debt management plans that DMO Nigeria has, adding that they
came with high expectations.
“We expect to get a lot of experience in skill
transfer from Nigeria to South Sudan, especially on how to manage the debt, it
is one thing to get it done, it is another thing to manage it.
“Nigeria got the experience, we will pick up a
lot of experience which we can apply to our situation to be better and be able
to manage our debt like Nigeria did.”
Also speaking was the Director General, DMO, Dr.
Abraham Nwankwo, who said the DMO appreciates the need to reach out to other
African countries, and so in DMO strategic objective, we’ve a programme for us
to share our ideas, knowledge and experience with other African countries and
also to learn from other African countries.
“So today we have received a delegation from
South Sudan which came to the DMO Nigeria on a five-day study tour so that they
can share from our experience how we have developed public debt management in
Nigeria, how we’ve developed the bond market and how we’ve managed Nigeria’s
public debt.”
One industry expert, Chief Gabriel Nwonuma noted
that the DMO has been outstanding on debt management, calling for the
sustainability in service delivery.
“Governance is a continuum; the DMO should
sustain what it is doing considering the economic crisis in the country. I am
happy that they have a very competent team that can sustain its service
delivery framework. DMO staff are frequently invited as resource persons to
various training programmes workshops, seminars and conferences by
international organizations including the United Nation and World bank.’’
The DMO’s transformation of the Nigerian
financial market, has deepened secondary market liquidity and transparency,
thus further aligning it with international best practices.
The remarkable growth in Nigeria’s secondary
market has contributed immensely to the growth in the overall domestic bond
market.
The DMO is on a mission to ensure that other
African governments subscribe to its principles of prudent and sustainable borrowing,
and effective utilization of resources by injecting breath of new life over
management of internal and external debt through best practices in the way of
improved policies, efficient administration, and the sweeping away of old
abuses to foster transparency and sustainability.
Nonetheless, the success of Nigeria’s Debt
Management Office, has not only being recognised by Nigerian’s alone, both home
and abroad but has become a model in Africa.
Ifeanyi Omokwe/GEE
*Omokwe is the Business Editor of The Whistler
Newspapers.
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