DMO SOLICITS MEDIA IN DEBT MANAGEMENT

The Director General of the Debt Management Office (DMO), Ms. Patience Oniha, has solicited the support of the media in informing Nigerians on the management of the country’s debt stock and government’s drive towards infrastructural development.
Oniha, who made the call in Lagos weekend when she met some editors, gave the assurance that the DMO will continue to be in the forefront of openness and engagement with the media so that Nigerians will be better informed.
 The DMO boss used the breakfast meeting to explain that her leadership, “will focus on loan repayment and loan utilisation to ensure proper implementation of Nigeria’s budget’’.
 She told the editors that the agency intends to clear debt repayment plans as well as bridge the gap between revenue and expenditure occasioned by drop in global price of crude.
 “For many years, the government had operated a deficit budget aimed at stimulating economic growth, because the revenue was less than expenditure.
 “DMO will support the government to bridge the gap between revenue and expenditure,’’ Oniha said.
 On why the federal government has continued to raise capital from the market, she explained that the focus on capital projects was a deliberate strategy to turn around the economy and boost infrastructural development.
 “That is why government’s focus is on borrowing. We need to upscale things so as to achieve goals of government.”
 Taking questions on why the government was going to refinance Treasury Bill stock with a proposed $3billion foreign loan, the DMO DG said: “As most of you know, the treasury bill notice is in the public domain. Treasury bills are issued for a tenor of 364 days’ maximum and the discount rate is about 18% to government. When you compare that to the rate of six to seven percent in the international market you realize straight away that there is a huge savings of 11 to 12 percent which is what we are trying to take advantage of.
 “It is not a new borrowing so it is not going to increase our debt stock. It is simply converting some of our naira debts to US dollars at a longer tenor and at a lower cost.”
 Remember the point that I made of the benefits of doing that is longer tenor and cheaper rate. By the time that borrowing in U.S dollars is due for repayment, several of the initiatives and policies of government would have materialized so you are not looking at repaying in one or two years. The naira is either stronger at exchange rate or at best remain at the level we have now.”
Most of the editors who spoke at the meeting assured the DG of the support of the media and expressed the hope that they will be frequent engagements so that they could properly inform Nigerians on the activities of the DMO.

FEC APPROVES REFINANCING OF OF DOMESTIC DEBTS BY EXTERNAL BORROWING

The Federal Executive Council has approved the refinancing of part of the country’s domestic debt through external borrowing.

Minister of Finance, Mrs. Kemi Adeosun, who disclosed this after the Federal Executive Council (FEC) meeting, allayed fears of increased borrowing, insisting that instead of borrowing Naira, “we are now borrowing dollars and at a cheaper rate.”

The approval followed a proposal by the Debt Management Office (DMO) for the refinancing of part of the country’s domestic debts, particularly Nigerian Treasury Bills (NTBs), through the borrowing of $3 billion.

The move is informed by the lower US Dollar interest rates in the International Capital Market (ICM), with Nigeria expected to borrow at a rate not higher than 7%, while issuances of the NTBs in the domestic market are at rates as high as 18.53%, which means that external borrowing is cheaper by about  12%. Analysts agree that the implementation of the refinancing will result in substantial cost savings for the FGN in debt service costs.

Besides reducing the cost of borrowing, the $3 billion is expected to be raised for a tenor of up to 15 years, which is very long compared to the maximum tenor of 364 days for NTBs. This move will effectively extend the tenor of the government’s debt portfolio. The longer tenor enables the Government to repay at a time when the economy would be stronger and more diversified, to meet the obligations.

The reduction in the level of the FGN’s borrowing from the domestic market would result in a reduction in domestic interest rates and free up borrowing space in the economy, particularly for private sector borrowers.

The $3billion from the refinancing will also represent an injection of foreign exchange into the economy which will boost the country’s external reserves.

The approval of the National Assembly will be obtained for the proposed refinancing before implementation in line with the Debt Management Office, Act 2003.

FG OFFERS MONTHLY SAVINGS BOND AT 13.535%, 14.535% FOR RETAIL INVESTORS

The Federal Government has offered for subscription two-year and three-year Savings Bonds to investors at 13.535 per cent and 14.535 per cent, respectively from Monday, August 7 to Friday, August 11, 2017.
A statement from the Debt Management Office (DMO) said the two-year bond will be due in August 2019, while the three-year bond has a maturity date of August 2020.
The offer has a minimum subscription of N5,000 with increases thereafter  in multiples of N1,000 up to a maximum subscription of N50 million.
According to the DMO, the bond is backed by the full faith and credit of the Federal Government, with quarterly coupon payments to bondholders.
The DMO stated that the savings bond will help broaden the country’s funding base.
The FGN Savings Bond is targeted primarily at retail investors to enable them contribute to the development of the country, while also earning good returns on a safe investment in a Sovereign instrument.
The FGN Savings Bond was launched by the DMO in March 2017 and is issued every month through stockbroking firms trading on the Nigerian Stock Exchange.
The FGN Savings Bond is promoting the savings culture in the country and enhancing financial inclusion.
Since its introduction in March, the FGN Savings Bond has attracted a lot of new investors to the FGN Securities market with its attractive features.
The income earned on the FGN Savings Bond is exempted from taxes and it can be traded in the secondary market on the Nigerian Stock Exchange.