In order to restructure the nation’s debt profile, the federal government
has opted to borrow less in Naira and more in foreign currencies
because it is cheaper...This is coming just as the Federal Executive Council (FEC) chaired by the Acting President, Yemi Osinbajo, also approved the Medium Term Expenditure Framework (MTEF) 2018-2020 with projection of 2.3 million barrels per day and a benchmark of 45 dollars per barrel.
Minister Of Finance, Kemi Adeosun, who briefed newsmen after the meeting explained that the decision to resort to borrowing in foreign currency was to give room for private investors to borrow in the local market in order to create more jobs.
Adeosun said “The memo that I presented was approved by council was as part of efforts to restructure our debt portfolio.
“We got an approval in June to restructure our debt profile, we will borrow less in naira and more in foreign currency because it’s cheaper and we want to prevent crowding out the private sector. We want to create room for the private sector so that they can borrow and create more jobs. So as part of that we sought approval and that was granted for us to refinance treasury bills.
“We will finance treasury bills as treasury bills mature ; we will be financing them in dollars up to $3 billion worth of treasury bills will be refinanced into dollars. As the naira treasury bills mature, we will be issuing dollar instrument. We are not increasing our borrowings we are simply restructuring. Instead of owing naira we will be owing dollars and the advantage to that one is cost reduction,the average rate we borrow internationally doesn’t exceed 7% .
“Our Treasury Bills we’re paying between 13.6 and 18.5. They are almost having the cost of borrowing. We are trying to relieve the pressure on debt services. As you know there are a lot of controversies that our debt profile is very high and one of the things we are trying to do to relieve is to refinance.
“The second thing to extend the maturity. all our treasury bills mature maximum 364 days. We will be taking that borrowing to 3 Years and the expectations is that as the economy recovers and grows, we will be in a much better position to repay instead of rolling over the debt which we are doing at the moment.
The third thing is that by reducing government borrowing to the tune of $3bn we create more room for banks to lend to the private sector and hopefully that will also create some downward pressure on the interest rate. We want to borrow as much in naira and hopefully that will begin to put pressure on the interest rate which we will agree have to come down.So that was the approval that was given and that is part of our overall strategy which aims to reduce borrowing.”
On the MTEF, Minister of Budget and National Planning, Senator Udoma Udo Udoma, said “Council today approved a memorandum that was submitted by my ministry and approved the 2018-2020 MTEF.
“As we know we have been having extensive consultation in the last few weeks with the governors,members of the public, leadership of the National Assembly about the MTEF.
“So we submitted it and was approved by council. The highlight of it is that we have committed to achieving a 7% growth rate by 2020 at the end of the three year plan in accordance with the Economic recovery and growth plan.
MTEF is based on the economic recovery and growth plan and in terms of the trajectory of getting the 7%, we have approved a slightly different trajectory in the sense that by next year our target 3.5% in 2018, in 2019 it will be 4.5% growth rate and of course in 2020 it will be 7% growth rate.
He continued “In terms of crude oil production, our estimate projection for next year is 2.3 million barrels per day. We expect it to be broken down to 1.8million barrels per day regular crude and 500 thousand barrels per day in terms of condensate. The price we projected for next year is $45. We are also committed in the MTEF to explore ways of raising additional revenue to reduce debt service to revenue ratio. As the Minister of finance said that is part of the policy of this government to make sure that borrowing is controlled and to make sure to keep a reasonable debt service to revenue ratio which will of course help to bring down interest rates.”
Minister of Communications, Adebayo Shittu, also told newsmen that the council approved a memo for the second National ICT infrastructure project of about N100 billion.
He said “Council considered and approved a memo for the National ICT infrastructural backbone project. It is popularly called NIPTI 2 and it is domiciled within the Galaxy Backbone. Galaxy backbone is a Federal government owned agency which engages in service wide connectivity of all government offices agencies, ministries and departments across the country.
“They have been NIPTI 1 project which is 80% complete. Essentially, it covers most of the southern states and also had a data center project.
NIPTI 2 is the concluding component of it to ensure the entire country is fully covered by fiber optics connectivity. Connecting the whole of the country’s by way of the federal government ministries, agencies and departments.
“The China NEXIM bank has graciously supported Nigeria. They funded phase one and they are funding this phase 2. By this approval the ministry of finance will enter into negotiations for the full implementation of the funding proposal with us. Essentially the funding will cost $328 million . Approximately 100 billion naira .
“When concluded it will not only cover federal ministries, department ,agencies and all of that but there will be enough for commercialization to the private sector particularly GSM companies and other ICT industries .
So, we hope that Nigeria will be making a lot of money from this particular facility when completed,” he explained.
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