Debt Management Office Research Articles

COMPARATIVE ANALYSIS OF RIDGE AND PRINCIPAL COMPONENT REGRESSION IN ADDRESSING MULTICOLLINEARITY

Multicollinearity arises when two or more regressors are correlated in multiple linear regression model (MLRM) and in most cases, one regressor variable can be predicted from another. Multicollinearity majorly results in inefficient regression model estimates and poor performance of the regression model. However, multicollinearity problem can easily be handled using various methods such as ridge regression, lasso regression, principal components regression, etc. This study compared the effectiveness of two estimators in handling multicollinearity problem in a given dataset. The estimators being compared are ridge estimator (RE) and principal components estimator (PCE). This research uses secondary data obtained from World Bank database, International Monetary Fund (IMF) database, and the Nigerian Debt Management Office to compare the two approaches of handling multicollinearity problem in MLRM. The presence of multicollinearity in the dataset was established using the correlation matrix of predictors and the Variance Inflation Factors (VIF's). Then ridge regression and principal components regression methods were used to fit models to the dataset respectively and their mean squared errors (MSE) were obtained. The MSE was used as performance evaluation measure for the regression models. Both methods addressed the problem multicollinearity in the datasets but the ridge estimator performed better than PCE by having the smallest mean squared error.

Financing Economic Development in the Face of Fiscal Constraints: Fiscal Sustainability Measures and Inflation Dynamics in Nigeria

This study explores the effect of fiscal sustainability measures on inflation in Nigeria, given the fiscal challenges facing the country. The objective of the study is to analyze how fiscal sustainability measures, such as debt-to-GDP ratio and debt service-to-income ratio, affect inflation. The methodology used includes analysis of annual data from 1980 to 2020 using Autoregressive Distributed Lag (ARDL) approach and impulse response function. The results show that debt-to-GDP ratio and debt service-to-export ratio have a significant negative effect on inflation, while debt service-to-income ratio, debt-to-export ratio, and exchange rate have a significant positive effect. This study also finds that inflation responds negatively to shocks from the debt-to-GDP ratio, debt service to exports, and exchange rate, while responding positively to shocks from the debt service to income ratio and debt service to exports ratio. In conclusion, it is important for the debt management office and the ministry of finance to reduce the debt service-to-income ratio and improve fiscal sustainability policies to stabilize inflation in Nigeria.

Empirical Analysis of the Impact of Debt Servicing on the Performance of the Nigerian Economy

The study interrogates the impact of debt servicing on the performance of the Nigerian economy. Using yearly time series data from 1980 to 2022 obtained from Debt Management Office, Central Bank of Nigeria and the World Bank National Account. The dependent variable in the model was Growth Rate of Gross Domestic Product (GRGDP), and the explanatory variables were External Debt Service (EDS), Domestic Debt Service (DDS), Interest Rate (INR) and Exchange Rate (EXR). The methodology utilized was the popular Auto-Regressive Distributed Lag (ARDL) model. Findings reveal that in the long run, EDS has a positive though insignificant nexus to GRGDP. For DDS the relationship is a significant negative association with GRGDP. Whilst for Exchange Rate a positive and significant relationship was found. INR had a positive but insignificant nexus to GRGDP. Based on the findings the study recommended the review of Nigeria’s debt sustainability plan, imposition of strict limits on amount to borrow, type and the sources from where to borrow. Also, Nigeria government should ensure that debt or borrowings are channeled towards project that are self-liquidating and infrastructure development as well as minimize the use of huge debt to finance recurrent expenditures.

Debt Dynamics and Fiscal Sustainability in Nigeria

This study investigated the stabilizing effect of sustainable fiscal policy on public debt dynamics as well as the impact of debt dynamics on fiscal sustainability in Nigeria for the period (1980 – 2022). Using secondary data obtained from the Central Bank of Nigeria Statistical Bulletin (2023), World Development Indicators (WDI, 2023), Debt Management Office (DMO – various years), Penn World Table (PWT – multiple years), and World Economic Outlook (WEO – various years), the study used suitable cointegration and other econometrics techniques viz: Dynamic Ordinary Least Squares (DOLS), Markov-switching model and polynomial models. It was found, amongst other things, that (i) Automatic debt dynamics can influence debt dynamics, (ii) The robustness or otherwise of primary fiscal balance determines the direction of changes in the total debt stock, and (iii) positive debt dynamics vis-à-vis dwindling revenue flows and growing government expenditure, would result in fiscal unsustainability. It was recommended, amongst other things, that since automatic debt dynamics is one of the significant influences on debt dynamics and is being fuelled by the direction of adjustments in inflation and interest rate, there is a need for concerted efforts at stabilising inflation and interest rate to stabilise public debt dynamics. Also, the study revealed that the size of the primary balance influences the changes in public debt stock. It was recommended that the authorities should endeavour to maintain a robust primary fiscal surplus to stabilise growth in public debt, if not minimise it and grow the economy.

Agency independence and credibility in primary bond markets

AbstractVast literature studies Independent Regulatory Agencies (IRAs). We contribute by studying the benefits of independence when the agent's work is relational and by studying developing and developed democracies worldwide and over many years. We do this by studying national Debt Management Offices (DMOs)—the state agencies that plan, issue, and manage national debt. DMOs define the benchmark assets on which capital markets and monetary policy depend—industry standards—and their decisions have allocative implications. We argue that formal independence of DMOs from political decision‐makers is a costly signal to large financial institutions on the government's potential to service and repay its debts. We introduce a new country‐year dataset of DMO legislation for 75 developing and developed democratic countries in the period 1950–2013. We find that DMO independence is likelier following debt defaults, war, high inflation, and high debts, and that DMO independence increases sovereign debt credibility.

Determinants of Financial Reporting Quality in Public Sector Entities: Empirical Evidence from Debt Management Office of Nigeria

Determinants of Financial Reporting Quality in Public Sector Entities: Empirical Evidence from Debt Management Office of Nigeria

Understanding the Nigerian Domestic Debt

The portion of a country's overall public debt that is owed to domestic lenders is known as its internal or domestic debt. The public debt profile of a nation is comprised of its external and domestic debt stock. This article provides insights into the various components and major holders of the country's domestic debt. The Country’s domestic debt profile, which is currently on the rise, has led to numerous challenges in the economy such as debt overhang, higher debt servicing costs, unstable currency rates, and crowding out impacts on the private sector, among others. Therefore, measures have been recommended to curtail the level of increasing borrowings. The goal of setting up a distinct public debt management agency such as the Debt Management Office (DMO) by the government was to continuously accomplish the benefits of cautiously sourcing financing to cover for government deficits at reasonable rates and with manageable medium to long-term risks.

Analysis of the Impact of Domestic Debt on the Nigerian Economy: 1980-2021

The study investigates the impact of domestic debt on the Nigerian economy from 1980 to 2021 to ascertain, among other things, the relative significance and impact of domestic debt on Nigeria's GDP growth. The study uses quantitative research with a secondary focus on CBN data. The Debt Management Office and Central Bank of Nigeria provided information on the stock of domestic debt, GDP, interest on domestic debt, and capital spending for Nigeria between 1980 and 2020. The gathered data were subjected to a linear regression model, and the model's effectiveness was evaluated using the E-view statistical program. The Unit Root Test and Ordinary Least Square Method were the techniques utilised in this study to assist in explaining the variation and other explanatory variables. The Autoregressive Distributed Lag model (ARDL)-Bound Test is used in the study to investigate and analyse cointegration. According to the findings, Nigeria's economy is negatively impacted by domestic wagers, interest rates on domestic debt and capital expenditures, budget deficits, and private-sector lending. The study suggests good domestic debt management and suitable debt-servicing strategies for the efficient expansion of the economy in light of this finding.

Effect of Increasing Government Debt Profile on Economic Prosperity of Nigeria

The study aimed at assessing the effect of increasing government debt profile on economic prosperity of Nigeria. Specifically, the study examined the extent that Gross Domestic Product (GDP) was affected, during the period of study, by rising domestic debt, external debt, and cost of borrowing in Nigeria. The data for analysis were sourced principally from CBN Bulletins and Debt Management Office. The null hypotheses that domestic debt, external debt, and cost of borrowing do not significantly affect Gross Domestic Product, were tested through a multiple regression analysis. The findings indicate that Domestic Debt has a positive and significant effect on Gross Domestic Product in Nigeria with coefficient of 1.005965 and p-value of 0.0000. Furthermore, the external debt stock reveals a negative and non-significant effect on Gross Domestic Product with coefficient of -0.083963 and p-value of 0.5909, while Cost of Borrowing exposes a positive and non-significant effect on Gross Domestic Product in Nigeria with coefficient of 0.038835 and p-value of 0.7589. The R-squared (Coefficient of Determination) indicates that 98% of the variations in Gross Domestic Product in Nigeria could be explained by changes in Domestic Debt, External Debt and Cost of Borrowing. The implication of the findings is that economic prosperity is facilitated by Domestic Borrowing while External Borrowing must be avoided where possible because of its’ negative effect on GDP. In addition, the effect of Cost of Borrowing on GDP is purely dependent on the appropriateness of use of borrowed fund. The study recommended that government should first explore internal sources of fund whenever borrowing is unavoidable in preference to foreign/external sources, reduce or avoid external borrowing and properly apply the borrowed fund for its economy to prosper.

Effect of Productive Expenditure on Economic Growth of Nigeria as Moderated by Public Debt

This study investigated the effect of productive expenditure on the economic growth in Nigeria as moderated by public debt for the period of thirty-one years, from 1991-2021. Ex-post facto research design was adopted. The data used in this study were secondary data derived from the Central Bank of Nigeria Statistical Bulletin while public debt data was sourced from Debt Management Office Annual Reports. The study used regression analysis and the result revealed that both economic service and social service expenditure have positive significant effect on economic growth but when moderated by public debt showed economic service expenditure has positive significant effect on economic growth while social service expenditure has a negative significant influence on economic growth in Nigeria. The study concluded that economic service and social service expenditures have effects on economic growth in Nigeria. The study recommended that the government should increase public spending on social services. This can be accomplished by utilizing public funding to improve educational quality at all levels of learning (primary, secondary, and higher education) through training programs that give the skills and information needed to increase labor productivity and create additional job possibilities. Furthermore, public spending in the health and social security sectors should be directed toward constructive expenditures that promote economic growth.

Moderating Effect of Public Debt on Protective Expenditure and Economic Growth of Nigeria

This study evaluated the moderating effect of public debt on productive expenditure and economic growth in Nigeria for the period of thirty one years, from 1993-2023. Ex-post facto research design was adopted. Administrative expenditure and transfer payment are proxies for protective expenditure while real gross domestic product is indicator of economic growth. The data used in this study were secondary data derived from the Central Bank of Nigeria Statistical Bulletin while public debt data was sourced from Debt Management Office Annual Reports. The study used multiple regression analysis. The regression result revealed that administrative expenditure has positive significant effect on economic growth but when moderated by public debt showed significant influence on economic growth in Nigeria. Meanwhile, transfer payment has no significant effect on economic growth but when moderated by public debt revealed an insignificant effect on economic growth in Nigeria. The study concluded that administrative expenditure affect economic growth while, transfer payment has no effect on economic growth. The study recommended that Government should direct more of its protective expenditure towards administrative expenditure as they accelerate economic growth. Also, proper management of public funds allocated to the administrative operations as they have the potential of raising the nation’s production capacity and providing employment for citizens in the country.

Domestic Debt and Price Stability in Nigeria

The impact of domestic debt on price stability in Nigeria from 2008 to 2023 is being analyzed in the research. The study employed an ex post-facto research design. Data from the Central Bank of Nigeria's statistical bulletin 2023 and Debt Management Office reports 2023 were used, specifically quarterly time series data. The dependent variable of price stability was inflation rate, while the independent variables were banking sector debt and non-banking sector debt. The Johansen cointegration test estimation was used based on the unit root test result which shows that domestic debt had no cointegration with inflation rate in Nigeria. Based on regression analysis, it was found that the banking sector debt had a positive significant effect on inflation rate in Nigeria, while non-banking sector debt had a negative significant effect on inflation rate in Nigeria. Therefore, the study recommended that banking sector debt should be properly channeled to productive financing of working capital in the agricultural sector for seedlings and fertilizers that will enhance price stability by reducing food inflation. Government should give more priority to domestic debt through non-banking sector debts such as the Sukuk loans which are tied to capital projects like roads, rails, and many other infrastructural developments.

Fiscal Policy and Inflation in Nigeria

Aims: This study aims to analyze how Nigerian government activities impact inflation, considering the inadequacy of monetary policy. It focuses on recurrent and capital expenditures in various sectors and their influence on inflation, as well as public debt and tax revenue's role in inflation dynamics.
 Study Design: The study employed secondary data.
 Place and Duration of Study: Data sources include the National Bureau of Statistics (NBS), Central Bank of Nigeria (CBN) statistical bulletin, Debt Management Office (DMO), and World Development Indicators (WDI) spanning from 1986 to 2021
 Methodology: The study employs econometric techniques, including unit root tests and Autoregressive Distributive Lag (ARDL) analysis, with Inflation Rate (IFL) as the dependent variable. Independent variables representing fiscal policy include capital expenditure on transfers (CTRA), recurrent expenditure on administration (RADM), recurrent spending on social and community services (RSCS), recurrent expenditure on economic services (RECE), recurrent expenditure on transfers (RTRA), capital expenditure on administration (CADM), capital spending on social and community services (CSCS), capital expenditure on economic services (CECE), government direct and indirect taxes (TAX), government capital expenditure (GCE), government recurrent expenditure (GRE), and external debts (PUD).
 Results: Key findings reveal that in the long run, only RADM, RTRA, CADM, CECE, CSCS, GRE, GCE, PUD, and TAX had statistically significant relationships with inflation (IFL). RADM, CECE, CSCS, GCE, PUD, and TAX exhibited negative relationships with IFL, while RTRA, CADM, GRE showed positive relationships. In the short run, RSCS, RTRA, CADM, CECE, CSCS, CTRA, GRE, GCE, and TAX displayed statistical significance. RSCS, RTRA, CADM, and GRE positively correlated with IFL, while CECE, CSCS, CTRA, GCE, and TAX had negative associations.
 Conclusion: The study concludes that Nigeria's fiscal policy should prioritize increased government capital spending in economic and social sectors to manage inflation effectively. Additionally, implementing fiscal restraint through higher taxation can help mitigate inflationary pressures.

The Effect of Foreign Debt on the Nigerian Economy

This study evaluated the effect of foreign debt on the Nigerian economy. Ex-post facto research design was adopted for the study and secondary data were used. A regression model was adopted for the analysis. The population of the study was three hundred and fifty staff of the debt management office Abuja. The sample size for the study was one hundred and fifty respondents that were selected scientifically from various departments of the debt management office. The study revealed that foreign debt has a positive and significant effect on the Nigerian economy. The study concluded that foreign debt is an important factor for the economic growth of developing nations like Nigeria if well managed. It was recommended that financial experts, policy makers, and Central Bank of Nigeria (CBN) should integrate suitable as well as appropriate measures towards ensuring effective management of foreign debt in order to enhance gross domestic product as well as the economic growth and development of Nigeria. That the Nigerian government should put in place more management techniques and restriction on access to external or foreign debt as most of the external debt cannot be accounted for in the infrastructural projects claimed by successive administrations and that external debts should be directed towards encouraging real investment so as to increase capital formation and achieve sustainable economic growth and development in the country.

Pakistan: One Year Growth Strategy


 Focus on Investment, productivity, and exports.
 Remove bottlenecks linked to terrifs, sludge: cost of regulation, financial &energy constraints.
 Initiate “Regulatory Audit”.
 Reduce bank’s holding of the government securities.
 Create a National Debt Management Office.
 Revisit DISCO’s management.
 Introduce pre-paid metering.
 Do away from uniform energy tariffs.
 Introduce wheeling and bilateral agreements.
 Tax Simplification
 Implement Point of Sale (POS)
 Deregulate the real estate market by eliminating NOCs and FBR/DC rates.
 Tie Real estate & city development.
 Unlock dead capital.
 Internet for all.
 Youth Involvement—promote sports, culture & clubs
 Promote street vending—huge employment generation.

Attitude, Subjective Norm, Perceived Behavioural Control and Digital Ṣukūk Adoption in Nigeria: The Mediating Effect of Awareness

Purpose ‒ There is an increasing number of digital ṣukūk issuances worldwide but the level of awareness and adoption in Nigeria is very low. This research examines the mediating effect of awareness on the relationship between attitude, subjective norm, perceived behavioural control and digital ṣukūk adoption in Nigeria. Design/Methodology/Approach ‒ The data for the research were collected from 750 questionnaires that were distributed using the systematic sampling technique to operators of the capital market and individuals in Nigeria, out of which 410 were retained. The partial least squares structural equation modelling (PLS–SEM) algorithm was used for the reliability measurement and constructs validity while the bootstrapping technique was used for testing the study hypotheses. Findings ‒ The findings reveal that awareness mediated the relationship that exists between subjective norm, attitude, perceived behavioural control, and digital ṣukūk adoption in Nigeria. Overall, the empirical findings rejected seven out of 10 null hypotheses developed to answer the research questions. Originality/Value ‒ The study serves as a pioneering effort towards unlocking the viability of digital ṣukūk adoption amongst the Nigerian populace. Research Limitations/Implications ‒ The findings provide empirical evidence that awareness mediated the interrelationship between the explanatory variables (subjective norm, attitude and perceived behavioural control) towards digital ṣukūk adoption in Nigeria. Practical Implications ‒ The findings suggest the need for the Debt Management Office (DMO) in partnership with the Central Bank of Nigeria (CBN) to facilitate the required regulation and standard pertaining to digital ṣukūk issuances and structures. Article Classification ‒ Research paper

Auditing Public Debt Using Risk Management

The Audit Office of the Republic of Cyprus conducted the first-ever audit of the country’s public debt, seeking answers to two key questions. Is government debt sustainable, and is debt financing efficient and effective in securing the lowest cost with acceptable risks? The audit’s findings were discussed by the parliament and can have significant ramifications for public finance. However, public debt management is quite complex, and the International Organization of Supreme Audit Institutions suggests that sufficient technical knowledge is essential in undertaking an audit, including an understanding of the uncertain macroeconomy, financing conditions, and government fiscal stance. We use a risk management model based on scenario trees in conducting the audit. The model determines optimal debt financing strategies to benchmark the performance of the country’s Public Debt Management Office and answer the audit questions. We also incorporate an integrated assessment model to examine the risks from climate change. The auditor general presented the findings to the Parliamentary Audit Committee in the presence of the Minister of Finance, and his recommendations are expected to have a significant impact on the debt operations of the country. History: This paper was refereed. Funding: This work was supported by the Auditor General Office of the Republic of Cyprus. A. Consiglio was partially funded by NRRP-GRINS [Grant PE00000018].

Statistics of Economic Growth in Developing Countries: A Case Study of Rwanda

Purpose: This study sought to analyze how economic growth in developing countries is influenced by public borrowing referencing on Rwanda as a case study. Methodology: The study used time series data from 1980 to 2018. The study used domestic debt and external debt to analyze how it influences Rwanda’s Gross Domestic Product (GDP). To achieve this objective, secondary data was collected from the National Bank of Rwanda and the debt office in Rwanda. The study employed multiple regression model to identify the relationship between the dependent variable (GDP) and the independent variables (domestic debt and external debt). The t-test was used to confirm the formulated hypotheses at the 5% significance level. Findings: The study found out that a positive relationship exists between IMF Loan and Rwanda’s gross domestic product, while a negative relationship exists between domestic debts and Rwanda’s gross domestic product, which violates the Keynesian theory of public debt. Conclusion: The study concludes that both domestic and external debt significantly affect economic growth in Rwanda. Recommendation: The study recommend that developing countries should develop a good structure of Debt Management Office including a plan for capacity building in order to make its proper debt strategy analysis without external support. The study also recommend developing countries to reduce reliance on internal borrowing to reduce competition between citizens and the government which can reduced economic growth. Furthermore, the study recommend developing countries to account for public debts and ensure that such debts are solely acquired for economic purposes rather that political purposes.

Debt Crisis and Nigerian Economy: An Assessment of the Buhari Administration (2015-2021)

External debt or recourse to loan borrowing is an effective measure providing alternative funding to augment limited monetary resources of a country in her quest for economic development. This loan, when appropriately used, advance infrastructural development that brings great dividend to the citizens but a departure from this put pressure on the economy which might lead to economy doldrums. Therefore, the aim is to examine if continuous loan actually generate economy buoyancy
 The study use qualitative analysis. Hence, it adopts a case-study research design approach. Primary data were generated from interviews with experts in the field of debt management and researchers in the area of political economy. Also, secondary data such as; journals, articles, books, library websites, newspapers, theses and dissertation and Debt Data documented by the Debt Management Office (DMO) available for a seven-year period (2015-2021).
 The paper found out that mismanagement and misappropriation of borrowed funds are the bane of development in Nigeria. Also, government neglect to economy diversification has made recourse to loan taking desirable as a source of alternative revenue for the country.
 Therefore, it was recommended that better debt policies to restructure and checkmate debt profile in Nigeria should be instituted while diversification of the economy will address the debt-to-revenue ratio impact of borrowing.

Effect of Debt Servicing on External Reserves in Nigeria

The management of Nigeria's external reserves, a key indicator of the nation's financial health and ability to withstand economic shocks, is at the centre of this economic investigation. This study investigates the effect of debt servicing on external reserves in Nigeria from the first quarter of 2010 to the first quarter of 2023. An ex post facto research design was adopted for the study. Quarterly time series data for external reserves, external debt servicing, and domestic debt servicing were collected from the Central Bank of Nigeria statistical bulletin and Debt Management Office reports. Philip Perron test was used to test the stationarity of the data and the ARDL test was utilized to determine the presence of a long-run relationship. The Fully Modified Ordinary Least Squares technique was used to test the effect of debt servicing on external reserves in Nigeria. The findings showed that external debt servicing and domestic debt servicing have a significant effect on external reserves in Nigeria. The study recommends that the Nigerian government through the Debt Management Office should emphasize diversification in acquiring external debts by engaging with multiple creditors, including multilateral institutions, bilateral partners, and global financial markets. Also, a strong emphasis should be placed on enhancing domestic revenue mobilization efforts. This can be achieved through fair and effective tax policies, reducing tax evasion, and promoting investments in sectors(like the finance sector)that yield sustainable revenue streams. Increased domestic revenue can alleviate the need for extensive domestic borrowing, thereby reducing the strain on external reserves for domestic debt servicing.