Debt Management Office (DMO) yesterday released the 2020 Revised External and Domestic Borrowing Guidelines for the federal and state governments, the Federal Capital Territory (FCT) as well as their agencies.
The guidelines, which stipulate how the various tiers of government could secure domestic and external borrowings, are derived from provisions from legislations and approved documentations, notably the Constitution of the Federal Republic of Nigeria; the Debt Management Office (Establishment, Etc.) Act, 2003; the Fiscal Responsibility Act, 2007; Investments and
Securities Act, 2007, and the Fiscal Sustainability Plan: Fiscal Framework for Sub-National Governments in Nigeria.
DMO explained in the introductory note of the guidelines published on its website that given the new developments in the fiscal operations of government over the years, especially in the area of public debt management, it became imperative to review and update the 2012 edition of the Borrowing Guidelines.
According to the new guidelines, to borrow externally, the federal government and its agencies are required to prepare a National Debt Management Strategy for the approval of the Federal Executive Council (FEC).
This is to be handled by DMO in collaboration with ministries, departments and agencies (MDAs).
Projects to be funded are also to be identified with the preparation of proposed borrowing requests to be submitted to the finance minister.
Such requests are to include documents on the projects to be funded, consistent with national development priorities and ‘Creditor’s Partnership Strategies.’
The Federal Ministry of Finance, Budget and National Planning is also required to collate requests for funding and conduct appraisal of projects to be financed with the borrowing to ascertain conformity with ‘National Priorities, Cost-Benefit Analysis, showing the economic and social benefits of the intended borrowing.
The ministry, in collaboration with the Budget Office of the Federation, is also required to prepare an annual budget, which specifies the financing gap, and the amount to be borrowed.
This is followed by the approval of the Federal Executive Council (FEC) and presentation to the National Assembly.
The ministry is also to obtain Resolution for External Borrowing from the National Assembly just as the minister is mandated to provide guarantee on behalf of any government in the federation for external borrowing after approval by the parliament.
The guidelines also stipulated that the external borrowing proposals of the state governments, the FCT and their agencies for the next fiscal year must be submitted not later than four months preceding that year to the minister for incorporation into the Medium-Term External Borrowing Plan.
All states and the FCT, wishing to contract external loans, must secure the approval of the State Executive Council or the FCT Executive Committee, for the borrowing proposal, which should include the amount, purpose of the loan and the repayment plans, including source of repayment for the loan.
The approval of the State Executive Council should also be evidenced in writing and duly signed by the Secretary to the State Government.
In addition, the Resolution of the State House of Assembly, duly signed by the Clerk should be provided. In the case of the FCT, the approval by the Executive Committee duly signed by the Secretary and FCT Minister. States and the FCT should equally ensure that their total loans, including the proposed loan, do not exceed 250 per cent of their total revenue for the preceding year.
The borrowing proposal must be submitted to the minister for consideration, the guidelines added, noting that the proposal should include the purpose for which the borrowing is intended and its link to the developmental agenda of the government; cost-benefit analysis, showing the economic and social benefits of the intended borrowing as well as cashflow projection of the project to ascertain its viability and sustainability, among other requirements.