DEBT MANAGEMENT ASPECTS OF CREDIT RATING AND FINANCE RAISING BY SUB-NATIONALS COMMENTS BY DR. ABRAHAM NWANKWO DIRECTOR-GENERAL, DEBT MANAGEMENT OFFICE, NIGERIA AT THE NATIONAL SUMMIT OF MUNICIPAL CREDIT RATING, ORGANIZED BY THE ASSOCIATION OF LOCAL GOVERNMENTS OF NIGERIA (ALGON), MARCH 17-19,2009.
Current focus: to remove constraints to the development of corporate and other
bonds – cost, legal administrative.
Existing Legislations and Guidelines Supportive of Good Credit Rating For Sub-nationals (1)
Ref: Investment and Securities Act (ISA), 2007; The DMO Establishment Act, 2003; The Fiscal Responsibility Act, 2008; The National Debt Management Framework, (2008-2012).
National Debt Management Framework contains Guidelines for External Borrowing, Guarantees and On-lending
Sample of Control and Prudential Provisions:
Federal and State Governments and their parastatals shall obtain Federal Government approval-in-principal, prior to full-scale negotiation for external loans
All external loans shall be supported by Federal Government Guarantee
Existing Legislations and Guidelines Supportive of Good Credit Rating For Sub-nationals (2)
The applicants for Federal Government Guarantee must provide evidence that they have not over-borrowed externally
Domestic borrowing by States are to be backed with Irrevocable Standing Payment Order (ISPO) attached to their statutory allocation
All banks and financial institutions wishing to lend money to the Federal, State or Local Governments or their agencies, shall obtain the prior approval of the Minister of Finance (DMO Act, Section 24; Fiscal Responsibility Act, Part X, Section 45)
There exists adequate legislations and guidelines for Sub-nationals in the area of public finance and debt management, which should facilitate favourable credit ratings for them
In particular, the DMO’s current initiatives of facilitating the establishment of a Debt Management Department in every State, will further enhance their chances of good credit rating
Appreciable progress is being made in developing the market for bonds
It is to the benefit of the States and Local Governments to ensure they are guided by the existing regulatory and prudential provisions, so that they can obtain favourable credit rating and less costly access to external and domestic funds.