1.1. BACKGROUND OF THE STUDY
Debt operationally, is defined as the Obligations owned by one country to another country, denominated in either local and /or foreign currency only or in both, comprising both domestic and external obligations (DMO,2002). Debt management in Nigeria refers to the technical as well as the institutional arrangements involved in organizing both domestic and the external liabilities so that the debt service burden is maintained/contained witching a sustainable level (Omoruyi, 2000). Debt portfolio of Nigerian government is usually the largest financial portfolio in a country. It often contains complex financial structures and can create substantial balance sheet risk for the government. Large and poorly structured debt portfolio also makes governments move vulnerable to economic and financial shocks and have often been a major factor in economic crisis (IMT, 2004). Together with overall macroeconomic policy debt management policy plays an important role in ensuring and maintaining long-term debt sustainability. Appreciating the significant role that public debt management can play in helping countries or nations cope with economic and financial shocks. The International Monetary and Financial Committee (IMFC) has requested that staff from the international Monetary Fund (IMF) and the World Bank Work together in cooperation with national debt managements experts to develop a set of guidelines on public debt management to assist countries in their efforts to reduce financial vulnerability. The IMFC’S request which was endorsed by the financial stability forum in the year 2000, was made as point of a search for board principles that could help governments improve the quality of their policy frame works for managing the effects of volatility in the international monetary and financial system, meanwhile contrast to 15 to 20 years ago, countries are now much more focused on managing the financial and operational risks inherent in their debt portfolio than was the case in the past. And the way in which the stock of debt is managed is becoming increasing sophisticated, especially in those countries levels or has experienced shock associated with the removal of capital flows. These Institutional responsibilities for debt management vary from country to country. In some countries, the ministry of finance is in charge of debt management, while in others, debt management functions are shared by more than one agency (the Central Bank and Ministry of finance for the most part). And in others, all functions and activities of public debt management are charged to a sole agency. Since 1999, President Olusegun Obasanjo has visited the world’s financial capital many times, seeking debt forgiveness and out the least, some meaningful relief. To ensure our creditors that Nigeria is a responsible country, he has ensured that we service our huge debts regularly. But all his effects in this regard so far until recently have been futile. The creditors would not bulge. They insisted we must pay up even though much of the debt is dubious because it is based on very dodgy figures and accounts. This is why the president become increasingly exasperated by their intransigence and sheer bloody mindedness, and public opinion was hardening around the popular but dangerous proposition that Nigeria unilaterally repudiates the debt. According to the Debt management office (D.M.O, 2004), Nigerian’s foreign debt increased to US $36 billion in the first quarter of the year 2005, in spite of the country paying close to US $40 billion in the past two decades. Another 48% constituted arrears, which are payments that should have been made. Only 7% was really the outstanding (debt).” This means that the penalty and interest equal US $ 10 billion. At this rate, by the time the debt is finally retired, Nigeria would have bettered of closed to US $ 100 billion. Such brazenly organized robbery perpetrated on mostly poor helpless countries by the international financial system controlled by the developed nations is worse than waging a war on a country, sucking it and pillaging its resources. Yet the original debt, most of which was accumulated during the second Republic to this debt burden, the Nigeria economy continues to experience strains and stresses arising largely from debt burden and debt over hang. Despite the debt management’s efforts put in place by debt management authorities since 1983 to deal with the debt problem and challenges.
1.2. STATEMENT OF THE PROBLEM
Though there were some inherent problems in the management of Nigeria’s debt between the attainment of independence in 1960 and 1970 when Nigerian’s external debt stock was less than one billion dollars, the seriousness and severity of the situation deteriorated significantly as time progressed. This was largely due to persistent inability of the country to meet its external debt service obligations. This situation has resulted in mounting arrears and unmanageable growth of the debt stock relative to available resources. The external debt stock which was about US $9 billion in 1980 has continued to grow geometrically. Correspondingly, the debt stock as a percentage of total export earnings rose to uncomfortable levels of 151% and 24% respectively. Meanwhile, despite the current enormity of the hardship caused by the debt burden, it has not been given the serious attention it deserves early enough, as the management strategies employed by the various debt management units have not yielded the desired results in practical reality. Thus the study focuses on the effect of debt management in Nigeria. It is for this reason(s) that this researcher is out to know the true nature of the effect.
1.3. AIMS AND OBJECTIVES OF THE STUDY
The major aim of the study is to examine the positive and negative impact of the debt management office in Nigeria. Other general objectives of the study include;
1. To examine the major roles of the debt management office in Nigeria.
2. To highlight the achievement of the debt management office.
3. To examine the challenges of the debt management office.
4. To examine the impact of debt management office in Nigeria.
5. To recommend ways of improving the services of the debt management office in Nigeria.
1.4. RESEARCH QUESTIONS
1. What are the major roles of the debt management office in Nigeria?
2. What are the achievements of the debt management office?
3. What are the challenges of the debt management office?
4. What is the impact of debt management office in Nigeria?
5. What are the ways of improving the services of the debt management office in Nigeria?
1.5. RESEARCH HYPOTHESIS
H0: There is no significant impact of debt management office in Nigeria.
H1: There is a significant impact of debt management office in Nigeria.
1.6. SIGNIFICANCE OF THE STUDY
This study would be of immense importance to policy makers and government at all levels towards achieving economic development. The study would also benefit students, researchers and scholars who are interested in developing further studies in the subject matter.
1.7. SCOPE AND LIMITATION OF THE STUDY
This study is on the positive and negative impact of debt management office in Nigeria using the debt management office in Abuja as a case study.
LIMITATION OF THE STUDY
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
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