From ISAAC ANUMIHE, Abuja Tuesday, November 15, 2011
The naira may strengthen to 153 against the dollar by the end of the year and reach 150 by the end of 2012, economists at Morgan Stanley in Johannesburg said. Photographer: Suzanne Plunkett/Bloomberg
Nigeria’s debt portfolio, which once became an albatross to Nigeria’s economy, is gradually becoming unmanageable again as the Director General of Debt Management Office (DMO), Dr Abraham Nwankwo, yesterday, put it at N6.1 trillion.
Nwankwo, who gave this figure in Abuja at the commencement of training for Nigeria’s first set of medium term debt strategy experts in Abuja, also said that the debt includes domestic and external.
According to the DG, the N6.1 trillion public debt stock represents about 19.6 per cent of the nation’s Gross Domestic Product (GDP), saying that the debt stock is sustainable.
“Even though the total debt stock has been growing over the past five years, the debt to GDP ratio has remained almost stable below 20 per cent, and that’s because you cannot talk of debt sustainability except in relation to the GDP,” he said.
He, however, disclosed that Nigeria’s GDP, over the last five years, has been growing very significantly, adding that the debt stock cannot be considered in isolation of GDP and economic activity.
The objective medium term debt strategy training, he said is to prepare a medium term debt strategy to help Nigeria’s debt profile address the issue effective risk management.
The DG told the trainees that at the end of the training, the DMO should be able to boast of a medium term strategy for Nigeria as well as having the skills to undertake the process next time round even without external technical support.
For him, even though the DMO had wanted the medium term strategy to be part and parcel of its portfolio of skills and documentations, the need for it has become more imperative given the developments in the global economy.
He also speculated that in the next few years the global economy will be dominated by concerns about public debt management and national debt management in general.
“It is good enough for a country’s debt to be sustainable and our debt has continued to be sustainable but also it is important to think about going into details of the risks that could emanate from the global and local economies and if those risks occur how do they impact on debt sustainability and how can we manage such risks so the essence of medium term debt strategy is to have a more robust framework to anticipate developments and to have concrete ready-made solutions for them to avoid the destabilizing impact of such developments,” he said.
Nwankwo also noted that DMO has taken a number of initiatives in the past to build the necessary tools for effective public debt management one of which is the national debt framework which was started in 2008 and terminates in 2012.
He also mentioned public debt management as another tool for the annual debt sustainability analysis which the DMO prepares every year including that of 2011.
These tools notwithstanding, he said the DMO also needs a medium term debt strategy that covers a minimum of three years and that medium term debt strategy will cover among other things technical decisions and other decisions relating to mix external and domestic borrowing, the mixed long and short term borrowing, and the currency mix.
Equally, the medium term debt strategy will deal with the issue of risk management that are both internal and external to the economy. This type of analysis, Nwankwo noted is more critical given the developments in the global economy where we can see a preponderance of debt crisis in Europe and America.
By training Nigerians to become experts in developing a medium term debt strategy for Nigeria the DMO is trying to reach the highest maturity level of having the technical tools for managing Nigeria’s public debts, he said.
On the state of the national debt management strategy which was started in 2008 to run till 2012, Nwankwo explained that it was derived from various guidelines; borrowing guidelines, domestic borrowing guidelines, external borrowing guidelines, as well as sub-national borrowing guidelines which the federal, state governments and their agencies used to control borrowing.
via Daily Sun
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