Nigeria’s Debt Management Office (DMO), reputed as a model in Africa, has become a major destination for out-sourced debt management skills and services in nearly two decades of its existence. The DMO, under the leadership of Dr Abraham Nwankwo, has been galvanised to become a leading player in sub-Sahara Africa. The achievement it has recorded so far has earned it accolades from renowned global institutions, as it has become a one-stop shop for effective public debt management.

It would be recalled that the DMO resuscitated the Domestic Bond Market in 2003 when it first issued Federal Government (FGN) Bonds. This landmark achievement was intended to restructure government’s domestic borrowing, which was predominantly short-term, and to develop the domestic bond market which had been moribund for about 20 years. To achieve these objectives, the DMO in collaboration with other stakeholders introduced several measures to deepen the market. Such measures included regular and transparent FGN Bond Auctions; the appointment of dedicated market makers, known as Primary Dealer Market Makers to support the bond auctions and ensure an active Secondary Market; a two-way quote-based market; existence of Benchmark Bonds; a Sovereign Yield Curve Extending to 20 years, and a diversified domestic investor-base.

In essence, a strong and well-established domestic bond market had been developed through inherent local capacity, without any foreign facilitation.
Based on the achievement of the DMO, the Nigerian Bond Market received international recognition through the inclusion of FGN Bonds in Global Bond Indices. The inclusions were recognition that Nigeria was one of the few emerging market countries with a robust domestic bond market. Thus, FGN Bonds were included in J P Morgan’s GBI – EM (October, 2012) and Barclays Capital’s Emerging Markets – Local Currency Bond Index (March, 2013).
Since these awards came after the Nigerian Bond Market had been developed, it follows, therefore, that they were recognitions for achievements already recorded rather than pre-requisites for the development of the market.

It is important to note that Nigeria became the only African country, after South Africa, to be included in the GBI – EM and also that there are several other emerging market countries such as Venezuela whose domestic bonds are not included in any international Bond Index. Their non-inclusion has not limited their markets or economies.
Notwithstanding the benefits of the inclusion of FGN Bonds in the GBI – EM, the DMO continued to introduce measures to attract more domestic investors to the Bond market, particularly non-bank institutions and retail investors, in order to enlarge and diversify the Nigerian economy.

Despite the delisting of FGN Bonds from J P Morgan, the Director-General of the Debt Management Office insisted that the Nigerian economy remains on a growth path, arguing that the country is operating at near-full unemployment of its resources. This, he said, leaves the country with all the potentials for real growth.
He also said a country like Nigeria that is yet to tap into its huge solid mineral resources and a well-fallowed agricultural sector, then the potential for growth is great.

According to him, Nigeria had its own Bond Market before JP Morgan ventured in; and that the Nigerian Bond market has been developing before they joined. As a result, that their exit mean little or nothing to the existence of the FGN Bond Market. Nigeria’s economy has been described as one of the most attractive investment destinations in the emerging markets, despite the headwind blowing across most oil-producing nations since 2014. According to Dr Nwankwo, the country’s economy will be attractive to investors all the time, because Nigeria is still a virgin and a great place for both local and foreign investors. Since its inception in 2000, the DMO - which was primarily established to centrally coordinate the country’s debt - has attracted the interest of a host of African countries, including Uganda, Sudan, Zambia, Zimbabwe, Kenya and recently South Sudan, to learn Nigeria’s experience in public debt management. Coming at a time when their countries were battling with stifling foreign and local debt, it was inevitable that the attention of the world was glued to the DMO; which saved Nigeria from its debt crises, and for the unprecedented success of the FGN Bond Market, particularly in reducing debt stock and cost of public debt servicing in a manner that saves resources for investment in poverty reduction programmes.
Back in 2006, Uganda came on a study-tour to Nigeria on two occasions, when a delegation came to learn from the DMO model as a basis for institutional arrangement.

In its desire to further develop its bond market alongside building strategic alliances, the Bank of Uganda also sought to engage Nigeria’s Debt Management Office in its capacity as a frontline regulator for all secondary market activities and a platform provider for the efficient listing, quoting and trading of bonds. While acknowledging the impact of the DMO in the Nigerian financial market landscape, with emphasis on technology as a key-enabler of its activities, the representatives noted that effective collaboration with other domestic and international financial market infrastructures such as DMO will serve to foster active market development in the Ugandan financial market, with a view to encouraging cross-border capacity-building.

Sudan also came on a study tour to Nigeria on two occasions. The first delegation came in December 12-16, 2005 to learn the workings of the DMO and its interface with stakeholders. Similarly, another delegation from the External Debt Management Unit in the Central Bank of Sudan and Domestic Debt Unit in the Sudanese Ministry of Finance visited the DMO for a month’s secondment programme from Monday, June 23 to Tuesday July 15, 2014 to learn from the Nigerian debt relief and restructuring phases, as well as debt management experiences prior to the establishment of the DMO.

Another instance was a visit by a delegation from the Ministry of Finance and National Planning of the Republic of Zambia, which undertook a one-week study tour of the DMO from 20-24th September, 2009. The purpose of the study visit was to enable the Zambians learn how the Debt Management Office, is structured, including the functions and how it carries out its responsibilities of managing the country’s public debt, and issuance of the FGN Bonds. A seven man team from the Zimbabwe Aid & Debt Management Office (ZADMO) in the Ministry of Finance equally visited the DMO for a week study-tour, from July 17 to 27, 2011 to understudy the processes of establishing and running an effective debt management office. This was part of its efforts to set up a centre of excellence in debt management in Zimbabwe.

The World Bank, in August, requested the DMO to host a delegation of officials from Kenya’s Central Bank, Capital Market Authority and National Treasury & Debt Management Office, on a study-tour of the Nigerian Domestic Bond Market.

The main purpose of the study-tour is for the delegation to gain insight into the developmental initiatives undertaken by the DMO, which have led to the remarkable growth and development of Nigeria’s Domestic Bond Market, considering the fact that up until 2003, when the DMO floated the first Federal Government of Nigeria Bonds, the FGN Bond Market, which is the pivot for the domestic bond market was in comatose for about two decades. The Kenyan delegation centred their interest on Formulation of Issuance Strategies for Securities, Policies for Benchmark Building, Primary Dealer Market Maker Programme, Communication Strategies with market stakeholders, Price formation and dissemination in the Primary and Secondary markets, Types of secondary market; Architecture, price discovery and transparency.

In accordance with the global recognition of the effectiveness of the DMO, on Tuesday November 30, 2015, a seven-man team from the Ministry of Finance and Economic Planning (MOFEP) of the Republic of South Sudan came on a five-day study-tour of the Debt Management Office, to understudy the agency and gain insight into the developmental initiatives undertaken, which have led to the remarkable growth and development of Nigeria’s Debt Management Office that has earned it such a global recognition. Speaking on the objectives of their visit, the Director-General, Directorate of Macro-economic Planning, Philip Ajack Boldit, who led the delegation, said South Sudan was keen to learning the various strategic debt management plans Nigeria’s DMO, adding that they came with high expectations. His words: “We expect to get a lot of experience in skill transfer from Nigeria to South Sudan, especially on how to manage the debt: it is one thing to get it done, it is another thing to manage it.

Nigeria got the experience, we will pick up a lot of experience, which we can apply to our situation to be better and be able to manage our debt like Nigeria did.”
In his response, Dr Nwankwo, who said the DMO appreciates the need to reach out to other African countries. And so in DMO’s strategic objective, “we’ve a programme for us to share our ideas, knowledge and experience with other African countries, and also to learn from other African countries.

“So today, we have received a delegation from South Sudan which came to the DMO Nigeria on a five-day study-tour so that they can share from our experience: How we have developed public debt management in Nigeria; how we’ve developed the bond market and how we’ve managed Nigeria’s public debt.”
An industry expert, Chief Gabriel Nwonuma, noted that the DMO has been outstanding on debt management and called for sustainability in service delivery:

“Governance is a continuum. The DMO should sustain what it is doing, considering the economic crisis in the country. I am happy that they have a very competent team that can sustain its service delivery framework. DMO staff are frequently invited as resource persons to various training programmes, workshops, seminars and conferences by international organizations, including the United Nation and World bank.’’
The DMO’s transformation of the Nigerian financial market, has deepened secondary market liquidity and transparency, thus further aligning it with international best practices. The remarkable growth in Nigeria’s secondary market has contributed immensely to the growth in the overall domestic bond market.

The DMO is on a mission to ensure that other African governments subscribe to its principles of prudent and sustainable borrowing, and effective utilisation of resources, by injecting breath of new life over management of internal and external debt through best practices in the way of improved policies, efficient administration, and the sweeping away of old abuses to foster transparency and sustainability.
Nonetheless, the success of Nigeria’s Debt Management Office, has not only been recognised by Nigerians, both home and abroad, but has become a model in Africa.

•Omokwe, Business Editor of The Whistler Newspapers, wrote in through ifeanyi@thewhistler.ng. Photo shows DMO DG, Abraham Nwankwo.

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