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The Debt Management Office (DMO) has stated that the federal government is committed to its fiscal consolidation programme aimed at reducing domestic borrowing to make room for the private sector,
Head, Policy, Strategy and Risk Management, DMO, Mr. Joe Ugoala, who stated this at the Capital Market Correspondents of Nigeria (CAMCAN) forum in Lagos, said the government plan is to reduce budget deficit financing by about 75 per cent in 2016.
According to him, “The succession of large budget deficits in the recent past has resulted in the rapid growth of public debt. Mindful of this, government has instituted a regime of fiscal consolidation, which envisages a reduction in government’s domestic borrowing over time.
“The federal government through the DMO is doing what it can to sustain the fiscal consolidation programme. In 2010 our budget deficit financing was over N1 trillion; in 2011,we reduced it to N856 billion. The government reduced it further and the following year (2012) by scaling down to N774 billion. In 2013, we have also reduced it significantly to N577.07 billion. The government’s ultimate aim is to reduce it to a little over N200 billion.”
Ugoala, who represented the Director General of DMO, Dr. Abraham Nwankwo, stated that the current practice of financing part of the country’s fiscal deficit by borrowing from the market had led to the development of the domestic debt market.
“It has brought other salutary benefits for monetary policy operations and the economy, these include: Removal of conflict of interest – clear separation of debt management functions from monetary policy operations – thereby allowing each agency, especially the CBN, to concentrate on its core mandate; Subjecting government’s borrowing to market discipline; Use of long-term as against short-term funds to finance long-term projects – a clear case of optimal asset-matching; Significant reduction in refinancing risks through tenor elongation,” he said.
He also disclosed that the federal government had concluded arrangements to issue $100 million Diaspora bond targeted at Nigeria abroad who want to invest in Nigeria’s infrastructural development and reap return at the end.
“The DMO is to sustain its initiatives in the market, by further diversifying the debt instruments available in the market and the investor-base, through the issuance of Diaspora Bond and FGN Bonds in Global Depository Notes (GDN) Format.
“Arrangements are being finalised for the installation of an Automated IT Platform for the FGN Debt Securities Market, which is expected to further enhance market efficiency in the domestic debt market.
“The focus of public debt management in Nigeria will remain maximising benefits from the domestic market and ICM, to motivate the private sector to mobilise stable capital for funding of real sector and infrastructure projects,” he added.