The Debt Management Office (DMO) in Nigeria

The Debt Management Office (DMO) in Nigeria

Debt Management Office

The debt management office (DMO) was established to project a positive image of Nigeria as a disciplined and organized nation capable of managing its assets and liabilities. It’s been two decades since its establishment, and the organization continues to work towards making that expectation a reality.

 In this article, we’ll highlight the core functions of the DMO and their various impacts on Nigeria.

History of the DMO

Before the DMO, Nigeria’s debt management was scattered among different departments and agencies. This led to a lack of coordination and inefficiencies. The lack of a streamlined process led to prolonged payment procedures, often resulting in penalties that increased the national debt.

To address these issues, The DMO was established following recommendations from the Debt Management Department (DMD) of the International Monetary Fund (IMF) after a comprehensive assessment of Nigeria’s debt situation in 1999.  The DMD suggested the establishment of a single agency responsible for all aspects of public debt management, including policy formulation, strategy development, borrowing, recording, servicing, and reporting.

Then on the 4th of October 2000, the DMO was established to centrally coordinate the management of Nigeria’s debt.

Initially, it acted as an autonomous unit within the Presidency but was later transferred to the Ministry of Finance in 2001 and upgraded to a full parastatal in 2003. The legal framework for the DMO’s operation includes the Fiscal Responsibility Act 2007 and the DMO Establishment Act 2003.

What does the DMO do in Nigeria?

The primary functions of the DMO are to advise the Federal Government on public debt management office manage the country’s debt and implement strategies to ensure sustainable fiscal and financial policies. Other specific functions include:

 1. Centralized Debt Management

Before its establishment, various government agencies managed debt in an uncoordinated manner, leading to multiple challenges. Now, the DMO is responsible for centralizing the management of Nigeria’s debt.

2. Debt Issuance and Management

The DMO issues government securities, such as Treasury bills and bonds, to raise funds on behalf of the government. These funds are used to finance budget deficits, refinance existing debt, and support various government projects and programs, like roads, hospitals etc.

 3. Debt Sustainability

The DMO develops and implements strategies to ensure the careful management of Nigeria’s debt to avoid excessive debt burdens that could strain the country’s finances.

4. Primary Dealer Market Makers (PDMMs)

The DMO appoints Primary Dealer Market Makers (PDMMs), which are financial institutions authorized to trade government securities directly with the central bank.

5. Debt Restructuring and Tenor Elongations

The DMO restructures the country’s debt, including the elongation of tenors. This involves converting short-term debt into longer-term obligations, contributing to a more sustainable debt profile.

6. Handling Creditors’

The DMO addresses the challenge of verifying creditors’ claims ensuring accuracy in debt figures and preventing conflicting information from different agencies.

What are Bonds?

Bonds are considered relatively safer investments compared to stocks because they offer a fixed income stream and the return of the principal at maturity. They play important roles in the global financial markets and provide a means for governments and companies to raise capital for various projects and operations.

When you buy a bond, you are essentially lending money to the issuer in exchange for periodic interest payments and the return of the principal amount at a specified maturity date.

What are FGN Bonds?

FGN Bonds are like loans that individuals give to the Federal Government through the Debt Management Office (DMO). When you buy these bonds, you’re lending money to the government for a set period. They are considered one of the safest investments because the government promises to pay back both the principal and agreed interest.

You can buy bonds starting from N50,00 and in multiples of N1,000

The minimum period you must keep the bond is two years, but they can have maturities of 3, 5, 7, 10, 15, 20, 30 years, or more. Also, the interest income earned is not taxed.

How to Buy FGN Bonds

1. Primary Debt Market

Auctions: The Debt Management Office (DMO) conducts FGN Bonds auctions monthly. Primary Dealer Market Makers (PDMMs) are appointed by the DMO to submit bids at these auctions. PDMMs, appointed by the DMO, can submit bids on their behalf and on behalf of their clients.

 2. Secondary Debt Market

Trading: FGN Bonds are traded daily in the Secondary debt market. Licensed broker-dealers, including banks and stockbrokers, facilitate trading on the floor of The Nigeria Securities Exchange (NSE) and FMDQ OTC Securities Exchange. PDMMs are obligated to provide continuous and effective two-way quotes, allowing investors to buy or sell FGN Bonds as needed.

What is the FGN Savings Bond?

This type of bond is created for individuals to save money with the government, earning interest over time. In simpler terms, the FGN Savings bond is a way for regular individuals to save money and earn some interest, kind of like a special savings account with the government.


What is Eurobonds Trading?

Eurobonds are like FGN Bonds but are issued in foreign currencies. Eurobonds trading involves buying and selling these bonds in international financial markets. It’s about the government borrowing money from global investors, and the trading part is like a big international market for these bonds.

 What are Nigerian Treasury Bills?

Treasury bills are short-term government debt securities. People lend money to the government for a short period, and the government pays it back with interest. It’s another way for individuals to lend money to the government, but for a shorter time and typically ranges from a few days to one year.

What is the Sovereign Sukuk?

Islamic bonds issued by the government, are compliant with Islamic finance principles. These are bonds that follow Islamic rules, allowing people to invest in a way that aligns with Islamic financial principles.

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