The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has called upon state governments to prioritize transparency in securing loans, utilizing them effectively, and managing their debts.
During the Sub-National Debt Management Performance Assessment Methodology (SN DeMPA) training in Abuja, Mr. Emefiele emphasized the need for increased transparency and debt management capabilities at the state level. He acknowledged that progress has been made since 2007, including the establishment of Debt Management Units (DMUs) in all state governments and the Federal Capital Territory (FCT). However, challenges persist in borrowing management, debt recording, public financial management reform, and building debt management capacity.
Mr. Emefiele, represented by Dr. Mahmoud Hassan, the Director of Monetary Policy and a member of the Technical Committee of the Board of Governors of the West African Institute for Financial and Economic Management (WAIFEM), highlighted the incomplete legal, regulatory, and procedural frameworks for state borrowing. Insufficient capacity within state institutions hampers the effectiveness and efficiency of public debt management. He also emphasized the urgent need for sound debt management practices and increased capacity among subnational government agencies, given the growing size and risk exposure of state debt portfolios.
As of July 2019, only seven out of the 36 states had completed subnational debt management performance assessments (DeMPAs), highlighting the importance of addressing these issues. Mr. Emefiele emphasized that debt sustainability and transparency in debt processes have become global concerns, with countries becoming increasingly stringent in ensuring repayment capacity. While acknowledging the necessity of borrowing to bridge financing gaps in budgets, he emphasized the importance of managing resources and utilizing debts effectively. He stressed the need for cost-benefit analysis and transparent institutional frameworks at the state level.
Dr. Baba Musa, the Director-General (D-G) of WAIFEM, added that both national and subnational debts should be structured to facilitate easy analysis. He highlighted the significance of an organizational structure conducive to debt portfolio analysis, a clear legal framework, debt management objectives, authorization to borrow and issue loan guarantees, strategy development, accountability, reporting, and skilled staff capable of undertaking risk analysis. Dr. Musa also emphasized that debt management is a separate public policy area with its own objectives, focusing on raising necessary funds, achieving risk and cost objectives, developing the domestic debt market, and executing strategies.
The training, jointly organized by the CBN, WAIFEM, and the World Bank, aimed to address these challenges and promote transparent and effective debt management practices among state governments.