Part of the presidential directive on the bailout package for cash-strapped states was the involvement of the Debt Management Office (DMO) which is expected to assist the 36 states to restructure their more than N660 billion commercial loans.
These loans were ostensibly incurred for development purposes in the states concerned. Going by that directive, this will entail extending the life span of the loans while at the same time reducing the states’ debt-servicing expenditures. It is heartening that the presidential approval and directive was sequel to a proactive strategy proposed by the DMO.
At the time President Muhammadu Buhari drew up this assistance programme, most states were on the verge of bankruptcy, with salaries and other financial obligations to their creditors outstanding. The president envisaged that by this reduction and extension of the debt servicing obligations, the states will not only receive a breather but also have more funds to attend to urgent needs.
This is possible because by the terms of these loans, the interests accruable to the creditors – Deposit Money Banks (DMBs) – are deductible at source. But with the new terms to be put together through the instrumentality of the DMO, the states will no longer have to strain so much, at least for the mean time.
The participation of the DMO in this policy thrust is in keeping with the terms of the Act of the National Assembly that gave it its legal life. It is also the agency of government that has, and maintains, a reliable database of all loans taken, or guaranteed, by the federal or state governments or any of their agencies. It also prepares and submits to the federal government a forecast of loan service obligations for each financial year, including those of the states, as well as prepares and implements a plan for the efficient management of Nigeria’s debt obligations at sustainable levels compatible with desired economic activities to ensure growth and development. It participates in negotiations aimed at realising these objectives.
It is in this context that we underline the role of the DMO in this bailout programme. While we rejoice at the lease of life to the states that this bailout is, it is also pertinent to point out that states must be constrained to be more fiscally prudent.
However, we are satisfied that the DMO is competently equipped to do the needful in the management of the portfolio of the states and instil in them the desired discipline to avoid the kind of recklessness that gave rise to the bailout programme.
This, in our view, must include monitoring the states’ expenditure on a regular basis to ensure that funds from the bailout programme are channelled to the appropriate places, especially the welfare of workers.
