Improving Public Debt Management
In the OIC Member Countries
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B) Public Debt ManagementGovernance and Strategy Development
Legal frameworkAccording to Section 4 Subsection 2 of the Constitution of Nigeria, the National Assembly has
the exclusive legislative power about the federal governments’ borrowing, and has in this
capacity adopted the following laws governing public debt management in Nigeria: (1) The
Debt Management Office (Establishment, etc.) Act of 2003 established the Debt Management
Office (DMO), a single, semiautonomous and professionally run agency where all public debt
management functions are centralized, with retroactive effect to August 2000. (2) The
Investments and Securities Act of 2007, in its Part XV regulates the procedure for the issuance
debt by federal, state, and local governments on national capital markets, and Part X of the
Fiscal Responsibility Act of 2007 contains general restrictions on public debt aimed at fiscal
discipline. For example, under the Fiscal Responsibility Act of 2007, Section 41 Subsection 1 a),
all tiers of government are required to borrow at concessional terms and long maturities.
However, according to Section 41 Subsection 2 of the Act, the Government may borrow from
capital markets if approved by the National Assembly. Furthermore, Section 42 Subsection 1 of
the Act provides for a general limit on public debt. (3) Other relevant legislation includes the
Treasury Bills Act, the Treasury Certificate Act, the Government Promissory Notes Act, CAP
164, and the Central Bank of Nigeria (CBN) Act 2007 (see DMO 2008 for details). The law in
Nigeria law requires the budget to accompany an appendix on contingent liabilities in the form
of tax risks and provide information on how to manage them (MoF and Public Credit 2011).
Managerial structure (incl. coordination with other policies)Before 2000 several departments in the Ministry of Finance, the Office of the Accountant
General of the Federation and the Central Bank were responsible for debt management
functions and coordination between these departments lacked efficiency. As a result of a huge
external debt overhang (external debt amounted to about 86.4% of GDP in 2000), public debt
management was professionalized and centralized at the DMO in 2000 (Nwanko 2011). The
DMO is separated into front, middle and back offices designed to fulfill different functions,
distinguishing those offices responsible for executing transactions from those responsible for
checking compliance: The front office executes market transactions, the middle office checks
compliance and the back office administers the accounting system.
Debt reportingThe DMO also established new standards in terms of transparency. The agency regularly
publishes several documents: each year, it publishes an “Annual Report and Statement of
Accounts”, which contains an appraisal of the government’s debt management strategy, a
detailed decomposition of domestic and external public debt, as well as sustainability and risk
analyses. In addition, it prepares an annual “Debt Sustainability Analysis Report,” in which it
reviews the current debt portfolio using simulation techniques. As part of this analysis, the
DMO also derives a recommendation with regard to the borrowing limit for the upcoming
fiscal year in order for debt to stay consistent with the overall limit on the federal
government’s debt. Moreover, the DMO prepares a quadrennial “debt management strategy”
and a quinquennial “strategic plan,” both of which outline the mediumterm debt strategy.
Lastly, it also issues borrowing guidelines for all tiers of government. Nigeria has not yet
developed a framework for assessing, recording and tracking contingent liabilities.
Debt management strategy (incl. risk management)