By G9ija

In this interview, Patience Oniha, the director general of Debt Management Office (DMO) explains the major considerations the informed the Nigerian government’s recent issuance of a new Medium-Term Debt Management Strategy for the period 2020-2023. The policy was approved last Wednesday by the Federal Executive Council (FEC).

Mrs Oniha who spoke on on Wednesday, said Nigeria’s loans from China are about N3.2 trillion and constitute about 11 per cent of its total external debt.

The official said they are all concessional loans that are project-tied and that there are no reasons for Nigerians to be worried about them.

She said Nigeria’s debt to Gross Domestic Products (GDP) is currently sustainable, but that there is a need for the country to do much better in terms of debt services to revenue.

What are the key considerations of the Debt Management Office towards the preparation of this new medium term debt management strategy document for Nigeria?

Oniha: MTDS is a strategy that guides your borrowing to reflect your economic objectives and then have targets, so that it is measurable. For this specific one, several things influenced the strategy and the target. Let me quickly say that we had actually prepared one before COVID-19 started, we had actually started but of course the assumptions were no longer realistic, so we started afresh. So what’s one of those assumptions? Of course the GDP was now going to be negative in terms of growth, secondly, borrowing was going to be higher so, if you remember the first 2020 Appropriation Act had a borrowing of about N1.7 trillion. That had to be revised and became about N4.2 trillion.

So it was revised to reflect lower GDP, new borrowing, increased spending obviously by the government for COVID-19 related issues whether on social welfare or on infrastructure. But it also included the fact that they are several activities that are going on that will affect the debt stock. So you probably must have heard about the promissory loans that we are issuing to settle the arrears of government, there’s also the Ways and Means advances at the CBN, and then the debt stock of some state-owned enterprises which, because we’re a signatory to IMF, we are required to include in the debt stock. So what I am saying essentially is there is some debt that would come on the balance sheet that has before now, except for 2018 when some promises started appearing. So those were the key considerations, and I think the other considerations which probably came as a shock also to everybody is that the sources of borrowing of course had changed. You remember we were very active in the International capital market before, but with COVID-19 things changed. So those were the key considerations behind the strategy.

Q: What are the contributions and considerations from the Ministry of Finance, central bank and others in putting it together?

Oniha: Okay, let’s just put it this way, it is a direct responsibility of the central bank because in working on a debt management strategy, obviously external reserves are important, exchange rates are important. With the Federal Ministry of Finance, we’re looking at revenues and even with the National Bureau of Statistics we are looking at targets for inflation and interest rates. So, those are the contributions that come from all of those and we analyse and then determine which strategy should be adopted. So those are like inputs into the process but in terms of what that strategy should be in terms of should we be borrowing more or less? What should be the ratio between domestic and external? Those are then left to the debt manager (DMO) to advise on