The Nation Newspaper

Tag: Debt Management Office (DMO)

  • Market operators urge CBN to reduce interest rates to accelerate growth

    Market operators urge CBN to reduce interest rates to accelerate growth

    Some capital market operators on Monday advised the Central Bank of Nigeria (CBN) and Debt Management Office (DMO) to reduce yield rates on Treasury Bills (TBs) and bonds to accelerate economic growth.

    They told the News Agency of Nigeria (NAN) in Lagos that the two agencies should bring down TB and bonds yield rates to encourage banks to lend to the real sector.

    Malam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd. in Lagos, said commercial banks had abandoned their core banking duties to seek haven in bonds and TBs due to their high yield rates as high as 18 per cent.

    Kurfi said that banks should be compelled to lend to the manufacturing sector to accelerate economic growth by reducing the bonds and TB yield rates.

    According to him, interest accruable to these instruments should be reviewed down to 13.01 per cent as it is the case with the Federal Government savings bonds that closed on March 17.

    Kurfi also urged the apex bank to pursue positive economic policies that would sustain the current gains in the foreign exchange market and inflation rate.

    He suggested that the Monetary Policy Rate (MPR) should be lowered to 13 per cent in the near future with the appreciation of the naira and further drop in inflation rate in view.

    Kurfi expressed optimism that stock market activities would close on the upbeat this week with investors’ anticipation of positive 2016 earnings from commercial banks.

    He said that more banks were expected to release their results this week to beat March 31 deadline stipulated by the Nigerian Stock Exchange (NSE) for companies whose financial year ended on Dec. 31.

    NAN reports that only three banks namely – Zenith Bank, Access Bank and Guaranty Trust Bank-  have released their 2016 audited results so far.

    Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., advised policy makers to embrace friendlier policies to sustain economic growth.

    Omordion said that transaction of the NSE would likely oscillate this week due to profit booking and reactions to expected good earnings as more financial results were expected in the market.

    He urged investors to combine technical and fundamental analyses in trading decisions to know the support and resistance levels.

    NAN reports that a turnover of 1.03 billion shares worth N7.98 billion were exchanged by investors in 13,441 deals on the NSE last week against 1.02 billion shares valued at N12.46 billion `traded in 16,400 deals in the preceding week.

    The Financial Services Industry led the activity chart with 853.41 million shares worth N4.27 billion in 7,904 deals, thus contributing 82.91 per cent and 53.50 per cent to the total equity turnover volume and value terms, respectively.

    The Oil and Gas Industry followed with 80.25 million shares valued at N1.15 billion traded in 1,443 deals.

    The third place was occupied by Conglomerates sector with turnover of 45.77 million shares worth N83.47 million achieved in 596 deals.

    The NSE All-Share Index appreciated by 415.15 points or 1.64 per cent to close at 25,653.16 against 25,238.01 achieved in the preceding week.

    The market capitalisation, which opened at N8.734 trillion, appreciated by N144 billion or 1.64 per cent to close at N8.878 trillion

  • DMO raises N1.18tr from domestic borrowing to fund economy

    DMO raises N1.18tr from domestic borrowing to fund economy

    The Debt Management Office (DMO) says it has raised the entire N1.18 trillion domestic component of the 2016 approved borrowing to fund the Nigerian economy this fiscal year.

    Addressing members of the senate committee on local and foreign debts, the Director General of the DMO Dr Abraham Nwankwo of the N1.8trillion approved to be borrowed in 2016, the DMO has been able to N1.18 trillion representing the entire stock of funds to be borrowed domestically in 2016.

    By raising the entire domestic stock, Nwankwo noted that “Nigeria has successfully developed a strong domestic market.”

    The remaining N635 billion which is to be borrowed from external sources he said, the country expected US$1 billion from the African Development Bank (AfDB) “but AfDB released $600 million.”

    The Ministry of Finance he said is working to secure the balance but the current economic situation was making the realization a Herculean task. However, Nwankwo noted that there is some good news because the government “can fall back on domestic borrowing.”

    Nwankwo also told the senators that the “DMO is working to see that the $1 billion Eurobond is mobilized by second quarter of 2017.”

    The DMO boss also revealed that the federal government is servicing its debt as at when due. According to him, of the N1.161 trillion to be serviced in 2016 the federal government he said has serviced N1.09 trillion.

    Nwankwo stated that “Nigeria is in a very strong position to service its debts because of our debt sustainability analysis which ensures that we make sure to we do not go near threshold of borrowing and to avoid unsustainable debts so we are operating miles away from the threshold.”

    Giving this development, Nwankwo assured the legislators that “we will build sustainable economy in the next 3-5 years.”

    Speaking on the proposed and controversial $29.9 billion loan, Abraham Nwankwo told the senators that “the $30 billion loan will be borrowed over a three year period not at once. Drawdown of the loan will be done based on the progress of the work and it is essentially for infrastructure because we don’t have revenue at hand to provide infrastructure.”

    These infrastructures he said “will help reduce poverty. There must be no leakages, that should be our focus and there must be accountability. Investment of $30 billion should be in infrastructure that can repay itself.”

    Internally, Nwankwo said the DMO has only received overhead allocations up to August  this year “because of recession, so we are making sacrifice.” He also said that of the DMO’s capital expenditure (Capex) for 2016, amounting to N87.3 million, only N33.79 million has been released approximately half.

    According to Nwankwo, “we are doing what we can with what we have to support the economy. We have advertised for tender to execute some capital items hoping that the balance will be released” he said,

    Senator Shehu Sani Chairman Senate Committee on Local and Foreign Debts in his remark urged the DMO to rigorously pursue robust and effective debt management measures.

    In this regards, the committee the senator said “is suggesting a holistic review of the Debt Management Office Act to address current challenges of Debt Management in the country. For example, an accounting officer who borrows money and misapplies such fund should be held accountable. There should be consequences for such misdemeanors.”

    On the issue of loan terms and conditions, the senate committee he said “will henceforth pay attention to the agreement on terms and conditions for loans obtained by government to forestall a situation where Nigerians are unnecessarily shortchanged.”

    Senator Shehu Sani lamented that “a casual observation of construction sites of projects funded from EXIM Bank of China reveals that only foreigners are the engineers, architects and other professionals. Nigerians are only engaged as unskilled workers. This situation is unacceptable. Such agreement must be in tandem with our laws and should serve our collective interest ultimately.”

    On the timeliness of receiving drawdowns from loans contracted by governments, senator Sani expressed shock “to discover that Lagos state is yet to receive drawdown from the DPO lll the National Assembly approved since December 2015. The executive must streamline the process and eliminate unnecessary bottlenecks.”

  • N95bn bonds to be issued by Nigeria on Dec. 14 – DMO

    N95bn bonds to be issued by Nigeria on Dec. 14 – DMO

    N95 billion (302 million dollars) worth of bonds is being planned for sale by the Nigerian Government on Dec. 14, its last debt auction for the year, the Debt Management Office (DMO) said on Tuesday.

    The office said it would sell N35 billion of a bond maturing in 2036; N25 billion of paper maturing in 2026 and N35 billion of debt maturing in 2021, using the Dutch auction system.

    Results of the auction are expected to be released on the following day.

    All the bonds on offer are reopenings of previous issues.

    Nigeria,Africa’s biggest economy issues sovereign bonds monthly to support the local bond market,thus creating a benchmark for corporate issuance and funding for its budget deficit. (one dollar= N315.00)

  • Domestic debt market will pay private sector, says DG

    Domestic debt market will pay private sector, says DG

    Private sector operators seeking long-term funding will get better opportunities in the domestic debt market, which is dominated by the Federal Government, Director-General, Debt Management Office (DMO), Dr Abraham Nwankwo, has said.

    The domestic debt market is an alternative source of borrowing for the government and organised private sector. Such debts are in form of bonds, Treasury Bills (TBs), debentures, loans among other instruments.

    Speaking on the Federal Government’s decision to borrow $7.9billion during a television interview, Nwankwo said the government was gradually retreating from the local debt market to give more space for private operators to access funds to grow the economy.

    He said: “After exiting the debt owed the Paris Club and London Club of Creditors few years ago, we saw the need to develop the domestic debt market so that private sector would be issuing debt instruments to develop the economy. We use the advantage of the market to fund the budget deficit. But now, the government is retreating to give private sector wider opportunities to operate.  The government is strategically withdrawn from the market, you can see it in the declining of the government burrowing domestically in the past three years.”

    He added: “In 2003, there was no long-term market for long-term funding. But with the establishment of DMO in 2005, the government has been having the opportunity of accessing long-term funding of 20 years tenor. This is unlike a gestation period of 12 months, usually given by the banks.”

    According to him, Nigeria debt has grown primarily for reasons not known to many Nigerians.

    “It is true that we exited the obvious components of our debts – that is debts owed the Paris and London Clubs. But we have not exited the debt owed the African Development Fund (AfDB), World Bank among others. Thereafter, we have to continue burrowing to pursue developmental agenda. I challenge any expert to go and look at the balance sheets of most developed economies. They are still borrowing empirically and historically. Debt is continuous. As at September 31, 2012, the foreign debts were $6.2 billion, while the domestic debts were N6.3billion. The debts are sustainable,” he said.

    The DMO’s boss allayed the fears that the government’s plans to borrow $7.9 billion would further affect the economy, stressing that the loans would be taken at concessionary rates from the World Bank and AfDB windows.

    “Prior to 2008, the nation’s debts were unsustainable because we could not pay the interests, and the principals on the debts. But the $7.9 billion debts Nigeria is planning to take would be sustainable. The reason is because the interests are  going to be very low. Some of the loans are going to the health, education, employment generations, among other areas germane to the growth of the economy,” he said.