Overview

 1. This department is responsible for the development of medium- and long-term strategies aimed at reducing debt costs and maintaining prudent degree of risk. It tracks macroeconomic issues and their impact on the activities of the DMO. It undertakes risk analysis, monitors, and reports on portfolio-related risks, and publishes economic and debt management statistics in regular bulletins and also, quarterly status reports on behalf of the DMO. It provides a check on the operations of all departments by ensuring compliance with DMO’s strategies and benchmarks. It undertakes research on macroeconomic issues, as well as global best practices on debt management and also conducts Debt Sustainability Analysis (DSA) on an annual basis, on the nation’s debt portfolio.

2.    The creation of the department is meant to cause a separation between those setting and monitoring the risk management framework (middle office) from those responsible for executing market transactions (front office) and those recoding them (back office). It is the reality check for the DMO. The department recommends policies for approval of the Board and formulates strategies to guide internal operations. It is also required to format strong working relationships with other governmental entities with the responsibilities for formulating macroeconomic policies, planning, public investment, cash management, budgeting, monetary policies and balance of payments.

3.    The Policy, Strategy, & Risk Management department constitutes the analytical group of the organization. It performs analysis of the total stock of domestic and external public debt and debt flows in specific periods. It provides information on the indebtedness to each creditor, while evaluating the nation’s debt composition for each creditor on currency, maturity, and interest-rate basis. It presents debt statistics in consonance with measurable indicators that conform to established standards of debt reporting that allow international comparison and measurement.

4.    The department promotes the use of centralized public debt databases at the DMO and interactive extranet in analyzing debt data and processing reports, part of which could be open to remote access by public entities in obtaining up-to-date information on the status of stocks and flows of public debt. The diffusion of information to intended audiences should be performed through a distribution programme prepared for this purpose according to the type of the reports and their periodicity. The preparation of debt information and reports should be subject to established standards and international best practice to allow comparability and to meet the specific needs of target audiences. The targets for the diffusion of information and reports to be generated by the department should include internal users in key public agencies that deal with fiscal and monetary economy like the FMF, the OAGF, the CBN, the NPC, States and Local Governments, etc. It should also be directed at such external audiences as multilateral institutions and international development finance agencies like the World Bank, IMF, African Development Bank, IFC; and creditors like the international commercial banks, Export Credit Agencies, as well as Embassies of creditor countries.

5.    The responsibilities of the department also includes the production of other information and reports needed for analytical purposes such as estimates and projections of disbursements and public debt service using various assumptions of variable interest rates and exchange rates. This information normally aids its function of coordinating debt management with other public policy objectives. It is required to integrate these statistics with the analysis of Balance of Payments information to develop debt strategies using appropriate DSA tools to enable it provide strong support to the Portfolio Management Department.

6.    The department is also responsible for proactive debt management, which measures the performance of the DMO within the a minimum-risk level, thereby reducing the risk for government funds. These functions provide substantive feedback to the Board through the DG, which permits functional evaluation and revision of the debt strategy by the Board. The department’s proactive debt management functions include the performance of:

o    Portfolio Analysis in macroeconomic framework, as well as debt sustainability and cost-risk analysis to be performed on regular basis for external and domestic debt. This form of analysis should include fiscal sustainability and scenario testing to be accomplished using appropriate DSA analytical tools;

o    Sensitivity Analysis using varying scenarios of exchange- and interest rates to provide information about the impact of different debt service scenarios on fiscal and monetary variables. This responsibility includes the establishment of targets for the appropriate external-domestic debt mix and desired amortization profiles.

Departmental Structure

1.    The department is made up of four units, as follows:

o    Policy & Strategy Unit: responsible for strategy formulation for internal operation, activity monitoring to ensure compliance with approved policies and operational guidelines, and making policy recommendations for the approval of the Board and the EDMC. This unit is supported by three sections in the exercise of its functions: Debt Strategy, Monitoring & Compliance; and Research & Documentation;

o    Risk Management Unit: responsible for risk assessment and proactive debt management;

o    Statistics and Analysis Unit: responsible for publishing periodic statistical bulletins and managerial reports on public debt; and,

o    Monitoring and Compliance Unit: responsible for ensuring compliance with established strategies and benchmarks as approved by the Supervisory Board.