In this interview, the fourth but first female Director-General of Debt Management Office (DMO), Patience Oniha, speaks with SANYA ADEJOKUN on developments in the debt sector.

With crude prices rising and more revenue coming to Nigeria, are you still thinking of borrowing as much as National Assembly has approved?

Let me start by saying that the 2018 budget hasn’t been passed yet. Usually, the DMO finances that part of budget deficit that it is asked to finance, meaning that after revenues and expenditures have been taken into account, it is that residual the DMO finances. And those approvals come from the National Assembly.

I think what you mean by saying that we are getting more money from oil is that oil prices have gone up since last year, but let me remind you that our budget is based on a benchmark crude oil price unlike many years ago when we spent money as it came. In the proposed 2018 budget, the National Assembly has approved a benchmark price of $47 per barrel. Therefore, it is not like we are going to spend all of the money coming in from improved oil sales. It is good thing oil prices have gone up but it doesn’t mean that now we are going to jettison the approved benchmark price.

Again, you would know that some of the key things the present administration has undertaken to do are to diversify the economy both for job creation, for growth and also for revenues. If the economy is growing, then taxes; whether income tax, companies’ income tax would also grow and other levies, fees and import duties. In other words, revenues are supposed to be coming from sources other than oil. The Voluntary Assets and Income Declaration Scheme (VAIDS) is one initiative for instance that is supposed to improve government revenues so let us shift the gaze to other sources of revenue.

What is Nigeria’s current debt to GDP ratio?

We have a debt to GDP ratio, which is amongst the lowest in the world, so if you are measuring sustainability, in terms of debt to GDP ratio, it is still very low. We had a debt to GDP ratio that was below 18 per cent but we are still compiling figures for December 2017 because we have to reconcile with foreign creditors. More importantly, one of the issues that have been topical is how we can really generate more revenues, especially with the fall in oil revenues to be able to service our debts, so the issue is more of debt service to revenue ratio. And the reason why debt service to revenue seems to have gone up these past years is that oil prices dropped by over 50 per cent. If you look at our actual earnings, it dropped by about 50 per cent but when you contracted the debt, it doesn’t respond to revenue because there is an interest rate and there is an amount that you took so it is almost like fixed and you want to be a good debtor because it is good for your rating, it is good for the perception of the country, good for the institutions that operate within it as well. We have thus serviced our debts as at when due and in that regard, we would say our debt is sustainable but if you go back to what I said before: debt service is this level, what are we doing with our revenue base? Once that revenue base goes up, debt service to revenue ratio will come down.

That takes me to one of the points we are talking about earlier; while we are optimistic and I know that the Minister of Finance is very much in the driver’s seat in terms of getting more revenue for the country; you know that out tax to GDP ratio is amongst the lowest in the world. What we are trying to do as DMO also is to say our debt service level is high because we have a large part of our debt in the domestic market where interest rates are high and I believe if you have been tracking interest rates, you will know that at some point, they got to 18 per cent, what we are trying to do is to say that whereas it is cheaper to borrow externally because you can get it for a longer tenure, our percentage of external debt to total debt as at September 2017 was about 23 per cent. And since our debt strategy target has always been to have 60:40 ratio of domestic to external debt, there is still room. So, part of the $3 billion we got approval to refinance is to reduce our domestic debt. Rather than borrowing, using treasury bills at that time at between 17 and 18 per cent- as you know, we borrowed at 6.7 and 7 per cent- the cost came down. In essence, Federal Government is working on the two sides- trying to moderate debt service and trying to increase revenues. Our debt is therefore, sustainable.

As DMO strives to return to the JP Morgan bond index, what are the derivable benefits?

The way to describe it is to look at the benefits we got before we were delisted. What it did for us and it is not just for the sovereign is that it attracted foreign investments because when foreign investors see the sovereign then they go below to look at the corporates, they look at equities and sometimes they even look at loans to institutions apart from buying their securities. Essentially what it did which is good for any economy is to have a wider pool of investors. More people came, there were many more investors for the various products. And what that does for you is providing more capital. One of the features of developing economies whether you call them frontier or less developed is that their level of savings is low so they always need to attract foreign capital.

With the listing, we will have more capital than we can generate ourselves in terms of savings but it is not only about the sovereign, it is also about various segments and for us looking at the sovereign borrowings, it serves as a reference benchmark rate. Our participation brought down the rates so it means other borrowers can issue at lower rates as well. Let me, however, emphasise the point that domestic bond market was developed by the Nigerian operators. The DMO, working with the central bank, primary dealers market makers who are all banks, all worked together to develop the local bond market. FMDQ came out of that process when a market has developed and we needed a platform for fixed income securities.

That market was developed locally and it was after we have developed it that we qualified for inclusion in the JP Morgan bond index. We can have a market without the foreign investors but is it good to have them participate. And my statement was that our markets have improved, the central bank has clearly worked hard on the foreign exchange market and we are witnesses. The volatility we had before and short supply now looks like they happened 10 years ago because of the various measures that were taken. So it is a case of you removing us because of our foreign exchange situation, but now is the time to take another look at our situation and rescind that decision. But we still have the domestic fixed income market.

DMO introduced the savings bond some months ago. How much have you been able to gather from that initiative?

Cumulatively, we have been able to attract over N6 billion from the national savings bond.

You have been director-general for exactly seven months having been appointed on July 1, 2017. What has your experience been?

It has been interesting. Not only by the nature of the job but also because of the state of the macro-economy as well as the things had we needed to do differently.

If you look back, we started with the Sukkuk, which we issued in September, we did the green bond in the domestic market in December and then we did the $3 billion Eurobond issuance in November. For the first time, we issued a 30-year Eurobond and only South Africa has one on the same clean note meaning there is no guarantee or World Bank/IMF backing. I think those are significant in terms of transactions. And in terms of the environment of work, we are trying to set certain practices and standards of work because the DMO should be up there as one of the top public service institutions

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