States Should Increase Their Internally Generated Revenue — DMO

October 17 04:34 2013 Print This Article

Director General, Debt Management Office (DMO), Mr. Abraham Nwankwo

The Director General, Debt Management Office (DMO), Mr. Abraham Nwankwo has advised state to shore up their Internally Generated Revenue (IGR).

According to the DMO DG in a chat with a section of the media pointed out that in view of the dwindling oil revenue, states have no other choice than to increase their IGR. Excerpts

What Prepared DMO For this Assignment?

What prepared us at DMO is that we appreciate that our country needs to advance rapidly. And what it takes for our country to advance in the next few years is for everybody to do their best. Based on that everybody at DMO is working hard on the assumption that what it takes for any country to develop is for each citizen to contribute their best and the country would develop on the next few years.

Are You Satisfied With DMO’s Approach To Debt Management in Nigeria?

We are proceeding from the basis that Nigeria is a Fiscal Federalism. And if you want the country to develop rapidly, you have to replicate whatever achievement you have at the centre, you need to democratise them at the state level. That is why we have taken the initiative to democratise public debt management institutions to the state level and basically to the local government level. I think, we are on the right part and we have been able to achieve this. In the past 5-7 years, the executive governors of the states have been very cooperative, they are all in sync with the whole idea of Nigeria working as a unit and moving forward. They appreciate the idea! Each of them have a high degree fiscal autonomy but we have only one economy. So all the states of the Federation are committed to cooperating federally which ensures we have an overall microeconomic stability.

An overall microeconomic stability is the centre of economic growth and progress. And you know the government of President Goodluck Ebele Jonathan is laying a lot of emphasis on microeconomic stability. If you look at the monetary policy, the exchange rate policy, the fiscal policy, the policy of fiscal consolidation are been pursued vigorously by the coordinating minister for the Economy. They are geared towards achieving a very stable environment which encourages domestic and foreign investors and entrepreneurship to make maximum contribution to the economy. We believe that it is working! Yes, you expect that there are challenges in the next couple of years. We would concentrate on fine tuning all the achievement we have made at the sub-national level. We will continue to work with them but capacity we will be built, we will cooperate with them on their debt management and we believe that in the next 3-5 years Nigeria will have 37 management offices that are world class.

How Best Can DMO Help States Grow Their Revenue Base?

The best way to help states grow their revenue is for them to increase their internally general revenue. Both the State Government and the Federal appreciate that they don’t need to depend on oil. Every state in the country has potentials to develop independent of oil revenue, therefore, Nigerians should stop bothering about development in the energy market. Rather our focus should be on how to develop each and every state of the Federation resource base. Agricultural resources base, solid mineral resource base, tourism resource base so that whatever each state gains from oil is simply on addition. But every state should develop itself in such a way that it depends on its agricultural potentials, it depends on its solid mineral potentials, it depends on its tourism potential. I guess that is what every state should be doing so that in next 5-7 years every state in the Federation can do without oil revenue. So that whatever oil revenue we get should be taken as an addition which we don’t really need. So DMO’s commitment is to contribute to the economy. As you know the $1billion that we raised recently from the international capital market is for the purpose of building gas power infrastructures that will be part and parcel of the reconfiguration of the private sector driven power sector. The whole idea is that when you have reliable power supply, you have increased the bases for other productive activities for manufacturing in various states of the federation, for mining in solid minerals in various states of the federation, for putting tourism potentials in various states of the federation because power is at the heart of  economic transformation. So we believe that with the support we are giving government through creating money from the capital market, in the next few years, power will be reliable and adequate. Every state will take advantage to ensure that it applies the necessary investments both domestic and foreign for manufacturing, for agro-processing in their various states. Our emphasis is not to encourage states to  borrow to argument their revenue. Our emphasis is that everybody should contribute whatever they can including DMO to ensure that every state generates enough revenue for its agricultural base, for its solid mineral base its tourism base.

How Far Has DMO Gone In Its Drive To Make Bonds Tax Free?

Bonds issued by government in Nigeria have remained tax free more than 3 years now. The federal government granted waivers on those who invest in bonds. That was applicable only to sovereign bonds; the ones issued by the federal government of Nigeria to encourage the demonstration of those bonds, the government removed taxes on incomes earned by those who invest in corporate bonds. Corporate bonds are competitive compared to sovereign bonds. So tax duties as well were removed and stamp duties also and I know that the Security and Exchange Commission had taken the initiative to reduce the cost of issuances in the capital market. All these interventions taken by government is to make sure that the Nigeria Capital market takes its pride of place. And as you know a lot of transformation is taking place on the floor of the Stock Exchange. All these is geared towards making Nigeria becomes the financial hub of Africa by the year 2020 according to it financial  masterplan.

What Other Thing Would You Engage On In Going Forward?

We have a target strategic plan of 2013-2017 and that plan contains all the things we will be doing in the next five years. We will keep developing the bond market, the bond market is an evolving market we keep adapting. Even the developing countries are readjusting themselves with the new reality of the debt system in those advanced countries and the eurozones. You expect that the DMO’s in these countries are evolving not to talk of our own which is relatively young. Over the next 5 years we continue strengthen the things we have achieved, we continue diversifying the bond market with new instruments. We will make sure we look into non-interest financial instruments, so that we take advantage of that segment of the market to make sure we maximise inflow of various source of funds from within and outside the economy to augment our internally generated revenue. In terms of system development, you expect that over the next years, we would improve our bond offerings and trading platforms. In the next 7 years, we would have interlinked ourselves with the Nigeria Stock Exchange, the CBN and SEC. And moving forward, in the next two years, we will have our platform with SEC by establishing their debt management department. We will find ways of networking and interlink electronically all the debt management offices. The summary is that we want to use debt management system to support the growth and development of the economy particularly supporting the private sector to support the economy through growth, employment and poverty reduction.

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