N544.06b worth of Sovereign Bond was raised to fund 2013 budget deficit- DMO

The Debt Management Office (DMO) on Sunday said that the Federal Government raised sovereign bond worth N544.06 billion to fund the 2013 budget deficit.

The DMO Director-General, Dr Abraham Nwankwo, said this at a two-day workshop in Badagry, Lagos.

The workshop with the theme: “Transformation of Nigerian Bond Market and its Benefits”, was organised by the Capital Market Correspondents’ Association of Nigeria.

Nwankwo, who was represented by his Head, Policy, Strategy & Risk Management, Mr Joe Ugoala, spoke on the topic: “The Role of DMO in the Transformation of the Bond Market”.

Nwankwo said that N744.44 billion was used to fund fiscal deficit in 2012, while N852 billion was also raised in 2011 for the same purpose against N1.36 trillion in 2010.

The director-general explained that before the resuscitation of the sovereign bond market, government borrowing from the domestic market was mainly in the form of 91-day Treasury Bills.

He added that four Nigerian banks took an advantage of the sovereign benchmarks established in the International Capital Market (ICM) to raise $1.85 billion (N290.45 billion).

Nwankwo said the amount was raised between January 2011 and November 2013.

He said that the banks that issued Eurobonds during the period were GTB Plc, Access Bank Plc, Fidelity Bank Plc and First Bank.

According to him, 20 Nigerian corporates have raised long-term capital of over N200 billion from the domestic debt market from 2005 to 2012 to fund the development of the real sector.

“The transformation of the domestic bond market in Nigeria and the ICM, provided alternative source of funding for government's financing gaps and development of the domestic debt market”, Nwankwo said.

He stated that the new bond market led to the establishment of international benchmark for foreign debt issuers by International Finance Corporation (IFC), a member of the World Bank group.

Nwankwo said that the IFC in March 2013, issued a Naira denominated debt instrument worth US$76 million in the domestic debt market.

He said that the succession of large budget deficits in the recent past resulted in the rapid growth of public debt.

Nwankwo also said that government had instituted a regime of fiscal consolidation to ensure reduction in government's domestic borrowing over time.