Patience Oniha, director general of the Debt Management Office (DMO), has called on State Governments to adhere strictly to borrowing guidelines and existing fiscal laws to ensure responsible debt practices that will spur economic growth and improve the quality of life for Nigerians.
Oniha made this known in Lagos during a workshop held for top policymakers under the States Action on Business Enabling Reforms (SABER) Programme for Results, a World Bank-assisted initiative aimed at strengthening subnational fiscal and business environments.
Speaking on the purpose of the workshop, Oniha said it was part of ongoing collaboration between the DMO and sub-national governments to build capacity in debt management and ensure better compliance with borrowing procedures.
“Borrowing by states is no different from borrowing by individuals or institutions, it arises when there is a gap between revenue and expenditure. That gap is called a deficit, and it is often reflected in the state budgets or the Medium-Term Expenditure Framework,” Oniha explained.
She stressed that borrowing, when done correctly and within legal frameworks, enables Governments to implement vital capital projects.
“These capital projects lead to an improved quality of life for citizens and create a more conducive environment for businesses. This, in turn, attracts both local and foreign investors,” she added.
The DMO boss highlighted that the workshop was designed to refresh states’ understanding of the legal and procedural requirements for borrowing, particularly in light of updated fiscal laws.
“There are at least three laws that states must comply with before borrowing can be approved. We are here to support the states by helping them understand the relevant laws, required documentation, and eligible purposes for borrowing. The Fiscal Responsibility Act, for instance, allows borrowing only for capital and human development projects,” Oniha stated.
She further revealed that the DMO had identified gaps in how borrowing requests from sub-national entities were previously processed.
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“We observed challenges in understanding and compliance, which made the assessment process tedious. With this workshop, we aim to enhance the capacity of states and improve the efficiency of these processes,” she noted.
When asked about Lagos State’s recent decision to halt foreign currency borrowing, Oniha maintained that such decisions are at the discretion of individual states.
“Lagos State has made that decision based on its context, and that’s valid. We operate under a system of fiscal federalism, so each state must decide what works best for them. However, most external loans accessed by states are concessional, meaning they have low interest rates and long repayment periods. These are often used to finance critical development projects at the grassroots level,” she said.
Oniha reiterated that borrowing, when tied to projects in sectors like education, healthcare, and infrastructure, not only improves service delivery but also boosts internally generated revenue for States.
“If borrowing is used to fund roads, schools, or health centres, we’ll see better learning environments, improved healthcare delivery, and more revenue generated through enhanced economic activity,” she said.
In his remarks, Abayomi Oluyomi, commissioner for Finance, Lagos State, said going forward, Lagos State would not borrow in foreign currency except on certain conditions.
He said Nigeria as a developing country generates very little revenue and that the resources required to uplift the people is very huge, resulting in deficit financing.
The SABER programme supports reforms to create a more business-friendly environment across Nigeria’s 36 states and the Federal Capital Territory (FCT), with the DMO playing a critical role in strengthening debt sustainability at the sub-national level.
