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Domestic bond market can finance 2016 budget deficit – Nwankwo

By on December 2, 2015

The Director General of the Debt Management Office (DMO) Dr. Abraham Nwankwo has said the Nigerian bond market  has the capacity  to provide funds that will be required to finance  2016 budget deficit.

The 2016 federal government budget is expected to be higher than the N4.4 trillion of 2015, indicating that the DMO will, as usual, borrow on behalf of the government to fund the deficit. This is more so given the falling crude oil prices.

However, considering the recent negative sentiments brought about by the delisting of Nigeria from the JP Morgan Bond Index, there are apprehensions in some quarters that government might not be able to borrow from the bond market and to finance any shortfall  in the 2016 budget.

But speaking during a one-day enlightenment   workshop in Lagos yesterday, Nwankwo said the Nigerian bond market has the capacity to provide whatever amount of funds  the government may require  to meet its budgetary requirements.

According to him, the JP Morgan delisting does not affect the market, saying the market was developed by domestic investors who are still very much around to invest in it.

“JP Morgan did into establish Nigerian bond market, it did into develop because JP Morgan listed us. They listed us because we have already developed the market.  JP Morgan  looks for countries  that qualify and  put them on their list  so that the can sell their own service. We developed the market by ourselves and the market is still there because the people who developed it are still here. We did not develop the market based on foreign participation, we developed it  and  it attract foreign participation. For the avoidance of doubt, we encourage foreign participation in the bond market, but that does not mean we depend on foreign participation. Since JP Morgan announced the delisting the bond from its index,  the Nigerian market has remained vibrant. We have had many auctions and they have been successful because on the average, over 80 per cent of those invest in the domestic market is by Nigerians and not foreign investors,” Nwankwo said.

The DMO boss said the Nigerian economy will be attractive to investors all the time because the country is still virgin, explaining  that because it is still virgin, it is a great place for investors both local or foreign.

“Nigerian economy continues to be strong and attractive to investors because Nigeria is operating at near full unemployment of resources whether in agriculture, solid minerals, oil and gas, transportation, ICT. This country is still virgin and because it is virgin it is a great place for investors local and foreign.

“So I can assure that whatever amount we reasonably decide to borrow from domestic and external sources, we are in a position to do that. And  even if we have need to go to the international market to do a Euro bond, we will succeed,” Nwankwo said.

He reiterated the fact that  the  country’s public debt  to gross domestic product remains sustainable, saying even before the collapse in oil prices, the country’s public debt had been managed in such as if there  was already a crisis.