The Director-General, Debt Management
Office (DMO), Dr. Abraham Nwankwo, in an
exclusive interview with selected newsmen in
Lagos spoke on issues affecting the economy
and the public debt management of the
country. He challenged the private sector to raise long-term fund to finance the real sector.
Other issues discussed include: privatisation,
infrastructure financing amongst others.
Excerpts: As at December 2012, you said that foreign
investors’ holding of FGN securities amounted
to $5.1 billion, can we have a more updated
figure? We are used to emphasising statistics that our
public debt is so much, and that is why in
today’s event, we focus on talking about what
the benefits are to the Nigerian economy
particularly through the private sector that
derive this beautiful statistics we talk about. So is it good enough to tell Nigerians our debt is
so much? We have spent today explaining to
financial journalists those statistics, what are
the opportunities embedded in them in real
term that will translate to good standard of
living for our people and that’s why our emphasis is on pointing out the opportunities
we have created for the private sector so that
they will issue their own debt instrument in the
markets. We have developed the market so that they can
raise long-term money to invest in the real
sector of the economy and infrastructure. By
so doing, they will create jobs for our teeming
population and it will lead to more income in
the society; because for every Nigerian who earns income by being gainfully employed, you
know that there are many other dependents
relying on that person, so there will be spread
in welfare and reduction in poverty. What is the most current figure of total
government debt?
Our focus now is not talking about figures, yes,
let me say in summary that our debts as usual,
remain sustainable, and the statistics are there;
but it’s not an issue of statistics. Over the past seven years, we are one of the least borrowed
countries in the world in terms of statistics;
however, government has continued to
emphasise from the public debt management
point of view that yes, our debt is sustainable. All of us should appreciate there is the need
for us to diversify our economy because we are
over- dependent on oil revenue for driving our
economy as a source of foreign exchange and
revenue for government and there is need to
diversify that. So, the focus is on diversifying the sources of revenue for government. If we
do this, we will observe that beyond the
statistics, our debt will even be more
sustainable instead of depending on oil and gas
for about 80 per cent of our revenue.
Abraham Nwankwo For instance, we can depend on oil and gas for
about 30 per cent, while we also depend on
revenue from agriculture. Yes, agriculture is
the biggest sector in the economy; but it’s high
time we operate it in such a way that many of
our farmers will be so productive and competitive and are exporting their products;
including the processed ones in particular and
as they export them, government earns income
in terms of duties; while the farmer also earns
more income. In that way, our economy will be
diversified both for the private sector and as a source of revenue for government and our
debt will therefore be more sustainable. Our
debt GDP ratio is still below 21 per cent
currently. Now, in terms of participation of foreign
investors in the wake of the global financial
meltdown, and because of Ben Bernanke,
Chairman of the Federal Reserve, Central Bank
of the United States’ statement that
quantitative easing is going to taper because there is a belief that the US economy is getting
better; following this statement, investors all
over the world started recalling their
investments wherever they were in anticipation
for higher yields so they could also diversify
their investments into the US economy to take advantage of it. So you could expect that the level we achieved
in 2012 has come down to anything around five
and seven per cent; but certainly, we are not in
a position to stabilise yet. All over the world, if
you listen to the financial market news from
the CNBC or Bloomberg, you will appreciate that recently, the additional reports coming
from the UK shows that their economy is
getting better to the extent that there was a
huge drop in the unemployment figure which is
positive for the US economy. For the fact that it’s positive for the US
economy means that for investors, there is a
higher prospect that they can earn more by
investing their money in the US economy,
therefore, it’s a time for them to wait a little
longer, hold their money and take advantage of the positive development in that economy. The
global economy in respect of that stimulus
from the US economy in terms of possibility of
the quantitative easing being drastically
reduced, that intermediate period is still on and
I guess it will take us up to the next two or three months to be able to settle at the new
level. What did you do to sell the $1.0 Eurobond to
the international community? The job was done by Nigerians. Investors
looked at the fact that the transformation
agenda of President Goodluck Ebele Jonathan
is on course, they looked at the various
components of the various sectors and saw
what the government is doing in agriculture and the fact that the distribution of fertiliser,
seedlings and other inputs had been
rationalised and made very efficient and they
are reaching the real farmers. Also, the fact that the Power sector has been
successfully privatised and we are at the
threshold of private sector power-led initiative
that will ensure adequate and stable supply of
electricity. A look at the infrastructure
transformation going on; especially roads, the fact that the railway lines have been revitalised
and some lines have started operating and
more are underway to be reactivated. Also, look
at the dramatic changes that have taken place
in the aviation sector and with our airports. They looked at the fact that in terms of
institution building, a lot has happened. For
example, in public debt management in Nigeria,
efforts have been made over a couple of years
to ensure that not only the Federal
Government; but every state of the federation has a functional debt management
department. When they look at all these as part and parcel
of the transformation agenda of President
Goodluck Jonathan, they came to the
conclusion that the Nigerian economy is doing
well and that it is on the right path and if we
continue the way we are going, there is no doubt that in the next five to seven years,
Nigeria would have arrived at a stage where it
would be so obvious to everybody that we have
left the group of underdeveloped countries
and more importantly, they are looking at the
various measures government is taking to ensure that the growth process is inclusive,
that in the process of growth even though we
have been registering very credible growth
rates in the world over the past five or more
years, the current efforts being made by
government to ensure that the growth process is inclusive like I said earlier, is generating
maximum employment and poverty reduction. These are the things that private investors all
over the world are taking into account. Of
course when we went to sell the bond under
the leadership of Dr. Ngozi Okonjo-Iweala, the
Coordinating Minister of the Economy and
Honourable Minister of Finance, we told the Nigerian story forcefully, being as factual as we
could; all aspects of the Nigerian economy;
including, politics, agriculture, banking,
infrastructure, human resources and media. We
told all the stories about Nigeria effectively
with facts and figures and it was obvious to the international investors that Nigeria is on the
right path; essentially we are crossing the
threshold and that Nigeria given its potentials,
has eventually come to terms and we have
taken advantage of those potentials
transforming them so that it will lead to welfare for the generality of the Nigerian
people. Looking at your efforts to create a flexible
market and considering the variety of debt
instruments you have in line with the medium-
term strategy, when do we expect to see some
of these products? Some of the products are already coming in the
near term; some will be in the medium term.
For example, the Global Depository Note we
talked about which is a way of encouraging
special classes of international investors who
would not invest directly in the domestic bond market except through a depository
arrangement, this is likely to come on stream
before the year ends as approved by the
National Assembly. We are working on the inflation- linked bond
and we believe in the near term, it will come to
fruition. The other flexibility arrangements we
talked about including the securities, lending
certainly will come on stream before the end of
the first half of 2014. So, many of these measures, the concrete new products as well
as the flexibility instruments are coming in the
near to medium term. Recently, the IMF raised Nigeria’s borrowing
threshold, what does that imply for the
economy? The IMF didn’t raise Nigeria’s borrowing
threshold, may be indirectly. Countries are
classified in various groups, so Nigeria belongs
to a particular category and because of the
changes in Nigeria’s per capita income, it has
changed categories and the one in which it belongs is allowed technically to borrow up to
56 per cent of our debt GDP ratio without
raising eyebrows in terms of credit worthiness
just as it’s much higher in developed countries.
So, it’s an appreciation from the point of view
of those global financial institutions that Nigerian economy is moving to the next level
and in doing so, it has been reclassified in
terms of its capacity to borrow.
Abraham Nwankwo However, Nigeria’s President, the Coordinating
Minister of the Economy and the Debt
Management Office have made it clear that in
spite of that technical space created, Nigeria
will continue to be conservative in its borrowing
as if nothing has really happened in terms of more space for it, so Nigeria will continue to be
prudent and continue borrowing as if it’s using
the old limits, because the emphasis is not for
government to do more borrowing, but to
create space for the private sector to do the
borrowing and that is why the theme of our interaction was on the opportunities created
for the private sector from debt management
achievements so they are now being
encouraged based on the benchmark created
in the international capital market, based on
the benchmark and market we have developed domestically, the private sector is now being
challenged to take advantage and be the
borrowers to invest in agriculture, solid
mineral, infrastructure and so on. On diversification of instruments and investors
base, what are you doing to tap into the global
alternative market like the Sukuk and others? Government is already working on alternative
financing sources and generally the non-
interest financing products including the
Sukuk. Just recently, there was a workshop in
Abuja organised by the Africa Development
Bank (ADB) which involved other African countries and we deliberated on how to go
forward, so Nigeria is seriously working on
establishing the necessary frameworks for
tapping into alternative sources of funding;
including Sukuk like I mentioned earlier. Nigeria is going to take advantage of all
available and appropriate sources. At the Abuja
forum, I did say that it should not be taken that
development of alternative financing should be
restricted to government just as in the
conventional debt instruments whereby we are encouraging the private sector to take
advantage. We are also for the non-interest
financing including Sukuk, while encouraging
the private sector to play the lead role, it’s not
for government to start issuing sovereign
Sukuks. At the appropriate time, they will do that, the private sector should understand this
new financing alternative so they could take
advantage of this. Is there a possibility of providing enhancement
for Nigerian corporates? There are various credit enhancement that are
already in place. For instance, the partial risk
guaranty offered by the World Bank Group and
this usually comes through the Ministry of
Finance, I’m aware there are a couple of
projects seeking funding through this alternative. There are arrangements in place if
some foreign investors possibly in
collaboration with Nigerian partners, want to
invest in the country and they need some form
of political guarantee that can be assessed
from the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank
Group, this is available. Let me also mention that something related to
that is the fact that the Minister of Finance has
made known on a number of occasions that
before the year ends, government would have
established the mortgage liquidity facility
which is to help the private sector to fund mortgages. These are some of the credit
enhancement schemes in various forms. The collaterised mortgage obligation (CMO) has
made it clear in many occasions that
government has obtained $300 million from
the World Bank as a mortgage liquidity facility
and that is being finalised before the end of
the year, so there is a lot that the government is doing to make sure that they provide the
necessary support for the private sector to
overcome some of the structural constraints
that they have. What are the different things government is
doing to encourage private organisations in the
real sector to approach the bond market? It is not the responsibility of government to
force private sector, the private sector is
always in a search for profit. Now, what
government has done is to provide that bigger
framework; especially the infrastructure.
Government has done the best thing it can do for the private sector as far as the bond
market is concerned. Government used the
opportunity of the fact just like any other
government, it would need to borrow money
from the market to fund its fiscal deficit which
is what every government does and did in the past. The government is subjecting itself to the
discipline of the capital market, borrowing
from the capital market. The government
didn’t simply go to borrow from the capital
market, it made sure that it’s structured in
such a way that it borrowed from the capital market, it developed the market for a long-
term fund for the private sector; so that’s the
best the government can do in that particular
respect and it has done so. Government knows that it also needs to
establish a benchmark for the private sector
and it has done that successfully making sure
that it succeeded in raising funds at attractive
coupons which will ensure that when Nigerian
companies go to raise their own fund it will serve as a benchmark. Go and look at other
countries that have issued bonds since we
issued ours, and what their own coupons are,
compared to ours. So government has done the best it can do as
far as debt market is concerned, it’s
permanently working with the private sector
like I said earlier, to make sure their various
concerns are addressed whether in terms of
tariffs, duties or infrastructure, the private sector does make proposal to the government
on what to do so as to make sure there are
appropriate infrastructure. However, the
private sector is encouraged not to abdicate its
own duty because in every economy, we have
three agents; we have the household, firms (private sector) and the government that can
work on its own while interacting with others. Go and monitor all the countries the world over,
in the past 10 years, there are few countries
that have achieved the type of macro economic
stability that Nigeria has achieved and that’s
one of the major things our private sector
requires, a stable macro economic environment and I’ m sure if you conduct a
research of countries in the world that have
achieved high level of macro economic
stability, Nigeria is amongst the first 20. Also, amongst the emerging market
economies, Nigeria is on the top five lists.
These achievements were as a result of
government’s deliberate policies in terms of
monetary, fiscal, public debt management,
exchange rate and banking policies. These are some of the things that government has done
to make sure that the economy is relatively
stable, but if government has not been
performing optimally as it has done in the last
two or three years, we will not have been doing
as well as we are doing now.
Office (DMO), Dr. Abraham Nwankwo, in an
exclusive interview with selected newsmen in
Lagos spoke on issues affecting the economy
and the public debt management of the
country. He challenged the private sector to raise long-term fund to finance the real sector.
Other issues discussed include: privatisation,
infrastructure financing amongst others.
Excerpts: As at December 2012, you said that foreign
investors’ holding of FGN securities amounted
to $5.1 billion, can we have a more updated
figure? We are used to emphasising statistics that our
public debt is so much, and that is why in
today’s event, we focus on talking about what
the benefits are to the Nigerian economy
particularly through the private sector that
derive this beautiful statistics we talk about. So is it good enough to tell Nigerians our debt is
so much? We have spent today explaining to
financial journalists those statistics, what are
the opportunities embedded in them in real
term that will translate to good standard of
living for our people and that’s why our emphasis is on pointing out the opportunities
we have created for the private sector so that
they will issue their own debt instrument in the
markets. We have developed the market so that they can
raise long-term money to invest in the real
sector of the economy and infrastructure. By
so doing, they will create jobs for our teeming
population and it will lead to more income in
the society; because for every Nigerian who earns income by being gainfully employed, you
know that there are many other dependents
relying on that person, so there will be spread
in welfare and reduction in poverty. What is the most current figure of total
government debt?
Our focus now is not talking about figures, yes,
let me say in summary that our debts as usual,
remain sustainable, and the statistics are there;
but it’s not an issue of statistics. Over the past seven years, we are one of the least borrowed
countries in the world in terms of statistics;
however, government has continued to
emphasise from the public debt management
point of view that yes, our debt is sustainable. All of us should appreciate there is the need
for us to diversify our economy because we are
over- dependent on oil revenue for driving our
economy as a source of foreign exchange and
revenue for government and there is need to
diversify that. So, the focus is on diversifying the sources of revenue for government. If we
do this, we will observe that beyond the
statistics, our debt will even be more
sustainable instead of depending on oil and gas
for about 80 per cent of our revenue.
Abraham Nwankwo For instance, we can depend on oil and gas for
about 30 per cent, while we also depend on
revenue from agriculture. Yes, agriculture is
the biggest sector in the economy; but it’s high
time we operate it in such a way that many of
our farmers will be so productive and competitive and are exporting their products;
including the processed ones in particular and
as they export them, government earns income
in terms of duties; while the farmer also earns
more income. In that way, our economy will be
diversified both for the private sector and as a source of revenue for government and our
debt will therefore be more sustainable. Our
debt GDP ratio is still below 21 per cent
currently. Now, in terms of participation of foreign
investors in the wake of the global financial
meltdown, and because of Ben Bernanke,
Chairman of the Federal Reserve, Central Bank
of the United States’ statement that
quantitative easing is going to taper because there is a belief that the US economy is getting
better; following this statement, investors all
over the world started recalling their
investments wherever they were in anticipation
for higher yields so they could also diversify
their investments into the US economy to take advantage of it. So you could expect that the level we achieved
in 2012 has come down to anything around five
and seven per cent; but certainly, we are not in
a position to stabilise yet. All over the world, if
you listen to the financial market news from
the CNBC or Bloomberg, you will appreciate that recently, the additional reports coming
from the UK shows that their economy is
getting better to the extent that there was a
huge drop in the unemployment figure which is
positive for the US economy. For the fact that it’s positive for the US
economy means that for investors, there is a
higher prospect that they can earn more by
investing their money in the US economy,
therefore, it’s a time for them to wait a little
longer, hold their money and take advantage of the positive development in that economy. The
global economy in respect of that stimulus
from the US economy in terms of possibility of
the quantitative easing being drastically
reduced, that intermediate period is still on and
I guess it will take us up to the next two or three months to be able to settle at the new
level. What did you do to sell the $1.0 Eurobond to
the international community? The job was done by Nigerians. Investors
looked at the fact that the transformation
agenda of President Goodluck Ebele Jonathan
is on course, they looked at the various
components of the various sectors and saw
what the government is doing in agriculture and the fact that the distribution of fertiliser,
seedlings and other inputs had been
rationalised and made very efficient and they
are reaching the real farmers. Also, the fact that the Power sector has been
successfully privatised and we are at the
threshold of private sector power-led initiative
that will ensure adequate and stable supply of
electricity. A look at the infrastructure
transformation going on; especially roads, the fact that the railway lines have been revitalised
and some lines have started operating and
more are underway to be reactivated. Also, look
at the dramatic changes that have taken place
in the aviation sector and with our airports. They looked at the fact that in terms of
institution building, a lot has happened. For
example, in public debt management in Nigeria,
efforts have been made over a couple of years
to ensure that not only the Federal
Government; but every state of the federation has a functional debt management
department. When they look at all these as part and parcel
of the transformation agenda of President
Goodluck Jonathan, they came to the
conclusion that the Nigerian economy is doing
well and that it is on the right path and if we
continue the way we are going, there is no doubt that in the next five to seven years,
Nigeria would have arrived at a stage where it
would be so obvious to everybody that we have
left the group of underdeveloped countries
and more importantly, they are looking at the
various measures government is taking to ensure that the growth process is inclusive,
that in the process of growth even though we
have been registering very credible growth
rates in the world over the past five or more
years, the current efforts being made by
government to ensure that the growth process is inclusive like I said earlier, is generating
maximum employment and poverty reduction. These are the things that private investors all
over the world are taking into account. Of
course when we went to sell the bond under
the leadership of Dr. Ngozi Okonjo-Iweala, the
Coordinating Minister of the Economy and
Honourable Minister of Finance, we told the Nigerian story forcefully, being as factual as we
could; all aspects of the Nigerian economy;
including, politics, agriculture, banking,
infrastructure, human resources and media. We
told all the stories about Nigeria effectively
with facts and figures and it was obvious to the international investors that Nigeria is on the
right path; essentially we are crossing the
threshold and that Nigeria given its potentials,
has eventually come to terms and we have
taken advantage of those potentials
transforming them so that it will lead to welfare for the generality of the Nigerian
people. Looking at your efforts to create a flexible
market and considering the variety of debt
instruments you have in line with the medium-
term strategy, when do we expect to see some
of these products? Some of the products are already coming in the
near term; some will be in the medium term.
For example, the Global Depository Note we
talked about which is a way of encouraging
special classes of international investors who
would not invest directly in the domestic bond market except through a depository
arrangement, this is likely to come on stream
before the year ends as approved by the
National Assembly. We are working on the inflation- linked bond
and we believe in the near term, it will come to
fruition. The other flexibility arrangements we
talked about including the securities, lending
certainly will come on stream before the end of
the first half of 2014. So, many of these measures, the concrete new products as well
as the flexibility instruments are coming in the
near to medium term. Recently, the IMF raised Nigeria’s borrowing
threshold, what does that imply for the
economy? The IMF didn’t raise Nigeria’s borrowing
threshold, may be indirectly. Countries are
classified in various groups, so Nigeria belongs
to a particular category and because of the
changes in Nigeria’s per capita income, it has
changed categories and the one in which it belongs is allowed technically to borrow up to
56 per cent of our debt GDP ratio without
raising eyebrows in terms of credit worthiness
just as it’s much higher in developed countries.
So, it’s an appreciation from the point of view
of those global financial institutions that Nigerian economy is moving to the next level
and in doing so, it has been reclassified in
terms of its capacity to borrow.
Abraham Nwankwo However, Nigeria’s President, the Coordinating
Minister of the Economy and the Debt
Management Office have made it clear that in
spite of that technical space created, Nigeria
will continue to be conservative in its borrowing
as if nothing has really happened in terms of more space for it, so Nigeria will continue to be
prudent and continue borrowing as if it’s using
the old limits, because the emphasis is not for
government to do more borrowing, but to
create space for the private sector to do the
borrowing and that is why the theme of our interaction was on the opportunities created
for the private sector from debt management
achievements so they are now being
encouraged based on the benchmark created
in the international capital market, based on
the benchmark and market we have developed domestically, the private sector is now being
challenged to take advantage and be the
borrowers to invest in agriculture, solid
mineral, infrastructure and so on. On diversification of instruments and investors
base, what are you doing to tap into the global
alternative market like the Sukuk and others? Government is already working on alternative
financing sources and generally the non-
interest financing products including the
Sukuk. Just recently, there was a workshop in
Abuja organised by the Africa Development
Bank (ADB) which involved other African countries and we deliberated on how to go
forward, so Nigeria is seriously working on
establishing the necessary frameworks for
tapping into alternative sources of funding;
including Sukuk like I mentioned earlier. Nigeria is going to take advantage of all
available and appropriate sources. At the Abuja
forum, I did say that it should not be taken that
development of alternative financing should be
restricted to government just as in the
conventional debt instruments whereby we are encouraging the private sector to take
advantage. We are also for the non-interest
financing including Sukuk, while encouraging
the private sector to play the lead role, it’s not
for government to start issuing sovereign
Sukuks. At the appropriate time, they will do that, the private sector should understand this
new financing alternative so they could take
advantage of this. Is there a possibility of providing enhancement
for Nigerian corporates? There are various credit enhancement that are
already in place. For instance, the partial risk
guaranty offered by the World Bank Group and
this usually comes through the Ministry of
Finance, I’m aware there are a couple of
projects seeking funding through this alternative. There are arrangements in place if
some foreign investors possibly in
collaboration with Nigerian partners, want to
invest in the country and they need some form
of political guarantee that can be assessed
from the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank
Group, this is available. Let me also mention that something related to
that is the fact that the Minister of Finance has
made known on a number of occasions that
before the year ends, government would have
established the mortgage liquidity facility
which is to help the private sector to fund mortgages. These are some of the credit
enhancement schemes in various forms. The collaterised mortgage obligation (CMO) has
made it clear in many occasions that
government has obtained $300 million from
the World Bank as a mortgage liquidity facility
and that is being finalised before the end of
the year, so there is a lot that the government is doing to make sure that they provide the
necessary support for the private sector to
overcome some of the structural constraints
that they have. What are the different things government is
doing to encourage private organisations in the
real sector to approach the bond market? It is not the responsibility of government to
force private sector, the private sector is
always in a search for profit. Now, what
government has done is to provide that bigger
framework; especially the infrastructure.
Government has done the best thing it can do for the private sector as far as the bond
market is concerned. Government used the
opportunity of the fact just like any other
government, it would need to borrow money
from the market to fund its fiscal deficit which
is what every government does and did in the past. The government is subjecting itself to the
discipline of the capital market, borrowing
from the capital market. The government
didn’t simply go to borrow from the capital
market, it made sure that it’s structured in
such a way that it borrowed from the capital market, it developed the market for a long-
term fund for the private sector; so that’s the
best the government can do in that particular
respect and it has done so. Government knows that it also needs to
establish a benchmark for the private sector
and it has done that successfully making sure
that it succeeded in raising funds at attractive
coupons which will ensure that when Nigerian
companies go to raise their own fund it will serve as a benchmark. Go and look at other
countries that have issued bonds since we
issued ours, and what their own coupons are,
compared to ours. So government has done the best it can do as
far as debt market is concerned, it’s
permanently working with the private sector
like I said earlier, to make sure their various
concerns are addressed whether in terms of
tariffs, duties or infrastructure, the private sector does make proposal to the government
on what to do so as to make sure there are
appropriate infrastructure. However, the
private sector is encouraged not to abdicate its
own duty because in every economy, we have
three agents; we have the household, firms (private sector) and the government that can
work on its own while interacting with others. Go and monitor all the countries the world over,
in the past 10 years, there are few countries
that have achieved the type of macro economic
stability that Nigeria has achieved and that’s
one of the major things our private sector
requires, a stable macro economic environment and I’ m sure if you conduct a
research of countries in the world that have
achieved high level of macro economic
stability, Nigeria is amongst the first 20. Also, amongst the emerging market
economies, Nigeria is on the top five lists.
These achievements were as a result of
government’s deliberate policies in terms of
monetary, fiscal, public debt management,
exchange rate and banking policies. These are some of the things that government has done
to make sure that the economy is relatively
stable, but if government has not been
performing optimally as it has done in the last
two or three years, we will not have been doing
as well as we are doing now.
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