Nigeria’s infrastructure stock, put at 35% of GDP, worries DMO

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The Debt Management Office has condemned Nigeria’s infrastructure stock, which is estimated to be about 35 per cent of the Gross Domestic Product.
The DMO said that the country’s infrastructure stock was low when compared to an average of 70 per cent for peer emerging market countries like South Africa, which is about 87 per cent.
The Director-General, DMO, Mrs. Patience Oniha, stated this during a meeting with selected finance journalists in Lagos.

Oniha, who was represented at the meeting by Mr. Oladele Afolabi, spoke on the theme, “Financing Nigeria’s Infrastructure Development: The Role of the Debt Management Office.”
She disclosed that Nigeria required an investment of $3trillion in infrastructure over the next 30 years, because the key focus areas were Power, Roads, Rail, Ports and Broadband Networks.

For the private sector to play this role, it will require a lot of financing from both domestic and international sources

According to her, the DMO supports the Federal Government’s financing of infrastructural development in various ways such as financing annual budget deficits, managing the government’s debt portfolio, issuance of guarantees for infrastructure projects, development of borrowing instruments, diversification of the investor base and developing Nigeria’s capital market.

Afolabi explained that the appropriation act was the Federal Government’s plan for its revenue and expenditure for the fiscal year, adding, “The expenditure includes various infrastructure projects to be executed by ministries, departments and agencies. In the preparation of the Budget, the DMO advises the government on the borrowing capacity for the year.

“The DMO also determines how the approved domestic and external borrowing in the appropriation act is financed – this is done through the issuance of securities in the domestic market, such as FGN Bonds and Nigerian Treasury Bills, borrowing from the World Bank, African Development Bank, issuance of Eurobonds. Through these activities, the DMO finances the government’s infrastructure projects every year.”
Oniha noted that the DMO had the mandate for the efficient management of Nigeria’s debt portfolio at sustainable levels.
“This is done in various ways through negotiating for favourable borrowing terms, servicing debts to avoid default, developing strategies to minimise cost and risk; by these activities, the DMO ensures that the FGN has continued access to financing, borrowing costs are well managed, thereby providing more resources for developmental projects,” she said.
In the area of issuance of guarantees for infrastructure projects, the DMO boss said that the ERGP expected the private sector to play a major role in the development of infrastructure.
Oniha said, “For the private sector to play this role, it will require a lot of financing from both domestic and international sources. The nature of infrastructure projects is such that lenders would require commitments from the government that awards contracts or grants concessions, usually in the form of guarantees. The DMO advises the government on the policies and procedures for the management of guarantees and other contingent liabilities.
“The DMO appraises projects that require FGN Guarantees and puts structures in place to support such projects, while also ensuring that the exposure of the government as guarantor is minimised. The guarantees enable the private sector to access financing for the development of infrastructure and at lower costs.”