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DMO admits debt service to revenue ratio high

The Debt Management Office (DMO) has admitted that the country’s debt service to revenue ratio was high, describing it a major issue of concern. The agency’s Director- General, Mrs. Patience Oniha, made the confession yesterday in Abuja while contributing to the fifth Budget Seminar (webinar) organised by the Securities and Exchange Commission (SEC) with theme: “Financing Nigeria’s Budget and Infrastructure Deficit through the Capital Market.” As a way out, she suggested to the government to channel borrowed funds into building infrastructure to generate revenue to service the debts. According to her, we have done the Sukuk, for instance, but government is the one servicing the debt of those Sukuk. “They (the debts) are not being serviced with revenue from those sources (infrastructure).

“I think that when we are talking about those innovations like revenue, bonds and all that, we should be talking about policies to ensure that the projects that we financed generate revenue,” she explained. Dr. Afolabi Olowookere, the Head of Economic Research and Policy Management Division of SEC, said the current system where government appeared to be the major financier of infrastructure projects was unsustainable. Olowookere suggested that adequate cost recovery system be adopted for any infrastructure to be revenue generating.

“One major source for financing infrastructure is Public Private Partnership. “Government must formulate policies and incentivise the development of domestic public debt markets,” he said. Mr. Oscar Onyema, the Chief Executive Officer of the Nigerian Stock Exchange (NSE), said the exchange was ready to support economic development in the country through infrastructural products. Onyema said that it would work with supply and demand side to create the needed environment at the exchange for infrastructure development.

In her remarks, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the capital market is very key. Past experiences have shown that the Nigerian capital market has been quite supportive in providing the necessary funds needed to finance government’s needs. Ahmed said: “The capital market is a room for various programmes and mechanisms that are targeted at aggregating and channelling long term capital for businesses and development. The Nigerian capital market has been doing this for many decades and has the potentials to do more.

I want to urge the capital market participants and operators to consider retail investments to give opportunity to the Nigerian citizens to invest within the capital market in an easy and simple way.” She described the theme as apt, given the urgency to raise infrastructure that are required for creating enabling environment, in which businesses and citizens of the country can thrive.

“Nigeria needs to spend and spend now more on infrastructure and other capital projects. A recent evidence of the benefit of spending is the fourth quarter GDP growth rate of the economy which was 0.11% resulting in Nigeria pulling out of recession after two quarters of negative growth.

This annual growth rate that was initially projected at -3.2% closed the year at -1.92% which is an improvement over most of the countries within our comparative groups,” the minister said. In a welcome address, Director General of SEC, Mr. Lamido Yuguda, expressed the belief that the capital market has the capacity to roll out innovative products to support Nigeria’s infrastructure needs and financing.

 

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