BusinessDay 12 Dec 2017

Tuesday 12 December 2017
C002D5556
BUSINESS DAY
19
EXCELLENCE IN PUBLIC SERVICE AWARDS
How benchmark bonds boost domestic market liquidity
Oniha began her career at
Icon Limited Merchant
Bankers in 1986, where
she rose to the position of
a Manager, before joining
First Securities Discount House
Limited (now FSDH Merchant Bank
Ltd.) in 1992. She rose to the position
of General Manager/Director before
joining Ecobank Nigeria Limited in
2000. Between 2004 – 2008, Oniha was
in Standard Chartered Bank Nigeria
Ltd. as a General Manager.
After a fulfilling career in the banking
sector spanning over 22 years,
Oniha made a career move to the
public sectors when she joined the
DMO in 2008 as Director, Market
Development Department. In this
capacity, Oniha brought her banking
experience to bear on various aspects
of the DMO’s activities.
A major achievement of hers
during her eight years at the DMO
was the introduction of Benchmark
Bonds to develop the domestic bond
market in order to improve liquidity
and to create a sovereign yield curve
which created opportunities for State
Governments, Multilaterals and Corporates
to raise long term funds. The
purpose behind this drive was to create
a debt capital market where the
Patience Oniha
Director General
Debt Management Office (DMO)
public and private sectors can access
long term funds to finance Nigeria’s
growth and development.
For sustainable development of
the debt capital market, she actively
engaged with local and foreign investors,
regulators and other stakeholders
to develop a large and diversified
investor base for FGN Securities and
Bonds issued by other borrowers.
Oniha managed the successful
issuance of Nigeria’s debut USD500
million Eurobond in January 2011.
The debut Eurobond opened a
new source of funding for the Federal
Government and Corporates. In
2013, she also managed the issuance
of the dual-tranche USD1 billion Eurobond
which was subscribed to the
tune of about 400%.
A number of Nigerian banks also
tapped into this funding window
by issuing Eurobonds. She was also
responsible for the inclusion of FGN
Bonds in the J.P. Morgan Government
Bond Index – Emerging Markets (GBI
– EM) in October 2012 which made
Nigeria the second country in Africa,
after South Africa to have its local
currency sovereign bond included
in the Index. The inclusion of FGN
bonds in this Index attracted foreign
investors to the domestic bond market
as a whole. This was followed by
the inclusion of FGN Bonds in the
Barclays Capital Emerging Markets
– Local Currency Government Bond
Index (EM – LCBI) in March 2013.
While still at the DMO, Oniha was
appointed as the Head of the Efficiency
Unit at the Federal Ministry of
Finance. To execute the mandate of
the Unit which was to moderate the
Government’s Overhead Expenditure
and generate savings from the
procurement process, Ms. Oniha
introduced a number of initiatives.
Amongst them were the issuance of
7 Circulars to control expenditure
on specific Overhead items and the
negotiation of discounts with airlines.
These delivered savings estimated at
N17 billion to the Government. She
was working on the introduction of
new processes for payment and procurements
when she was appointed
Director-General of DMO with effect
from July 1, 2017.
Oniha obtained a B.Sc. Economics,
First Class Honours from the University
of Benin in 1983 and went on to
earn an M.Sc. Finance from the University
of Lagos in 1985. She is also a
member of the Institute of Chartered
Accountants of Nigeria in 1990 and a
Fellow in 2008. She is also an Associate
Member of the Chartered Institute
of Taxation of Nigeria.
Since her return to the DMO, Nigeria
has issued its debut N100 billion
Sovereign Sukuk as well as, the
first 30-Year tenored Eurobond in the
International Capital Market which
represents the first by a sub-Saharan
country other than South Africa and
has established the basis for long term
infrastructure funding.
‘DMO will support initiatives that boost public finance management and reforms’
Patience Oniha is the Director General of the Debt Management Office (DMO). In this interview, she speaks about how Nigerians could benefit by investing in Nigeria’s domestic debt market.
Talk us through your activities
at the Debt Management
Office.
I’m Patience Oniha, the Director
General of the Debt Management
Office that is popularly referred
to as the DMO‎. Let me start by giving
some background to the Debt Management
Office which was established in the
‎year 2000. The enabling law that established
DMO is the DMO Act of 2003.The
Act authorises the creation of the Debt
Management Office in Nigeria. The Act
also clearly specifies what the mandate
of the agency is, what it is supposed to
be doing and what it’s reporting arrangements
are.
Our mandate is really to manage the
public debt. The public debt means the
total borrowing, that is, the debt stock
of the federal government. In managing
the debt stock of the federal government,
there are lots of activities involved.
Whether we are individuals or the
government, we tend to borrow for one
thing or the other. For instance, a salary
earner who wants to buy a car could get
a loan from the bank or the mortgage
provider; same also with the government.
So, when the government earns some
revenue, meaning the income it generates
from taxes, tariffs and import duties,
and if these are not enough, we say there
is a revenue shortfall. This implies that
the revenues are not enough to finance
the government’s expenditure. So, the
government just like an individual would
seek to borrow to support the budget.
The three components of the expenditures
are the capital, which are the monies
you spend on roads, schools, and projects
like that; the recurrent where the government’s
pay roll is covered, and verhead
expenditure. Our duties and our strategic
roles are to enable the government fill
that gap, so that the government could
meet that gap. In a nutshell, these are
the things we do.
Can you share your thoughts on
how the government initiates its
borrowing plans to support budget
deficit?
Another key question is how do we
borrow? The DMO is to ensure the debt
is managed, and borrowing is part of it.
So, we could borrow in Nigeria and we
could also borrow outside of Nigeria. So,
when you hear about domestic borrowing,
we are talking about the borrowing
we do in Nigeria, and when you hear
about foreign borrowing, it consists of
the Eurobond, and the Diaspora bond;
or those loans we take from institutions
such as the World Bank or the African
Development Bank. So, all these added
up, we manage it. We can use a combination,
whether domestic or international
to finance the deficit in the budget or to
finance other special projects that could
arise.
Talk us through the activities in the
domestic market?
In the domestic market, we borrow
from the public. The public in this sense
refers to the retail investors, the small
and medium enterprises, cooperative
societies and associations, and those
ones we call institutional investors-such
as insurance companies, pension funds,
and all support the government to fund
its budgets.
What we find in the domestic market
more often is that you hear of the Nigerian
Treasury Bills (NTBs). The DMO issues
NTBs as a security just like companies
would issue shares. The government issues
what is called bonds. The two that
we have issued in Nigeria are the Nigerian
Treasury Bills; and the Federal Government
of Nigerian Savings Bonds.
The Nigerian Treasury bills is a short
term instrument, so if you have money
to invest for a year that is the security you
will buy. It is issued for tenures of 90 days,
180 days,270 days and 360 days. If your
money is short termed, it means you need
it quickly, that is the one you should buy.
How do you alert the public to
invest in debt products, and can
we know some of the products for
investments?
To know how to buy them, we always
place adverts in the newspapers, Central
Bank of Nigeria’s (CBN) website, DMO’s
website and other sensitisation channels.
All you need to do is to go through
your bank which will guide you on how
to proceed. You pay through your banks
at no costs to you‎, as your bank guides
you at no costs.
The other product we issue is the federal
government of Nigeria’s bonds, and
it is still a debt. It is an IOU-a promissory
note issued by the federal government.
But unlike the NTBs, this one is for different
tenures of 3 to 20 years. We have
3 years,7 years,10,15 and 20 years. So,
whichever of those that fits your savings
preference, you can buy it. To buy those
bonds, they are for long term. The treasury
bills are for short term because they have
a maximum tenor of one year.
With the Federal Government of
Nigeria bonds, usually at the beginning
of the third week of the month, you will
see a notice in the newspapers from the
Debt Management Office and also on the
website, and the bankers also tell you, and
it is called an ‘Offer Circular’ and it tells
you that the general public could come
and invest in this circular.
The one we introduced in March this year
is the Federal Government’s Savings Bonds.
For now, we issue it for the tenure of 2 and 3
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