Nigeria to save N168 billion annually from proposed $5.5 billion loan, Says Mrs. Adeosun

share on:

The proposed $3 billion debt to be borrowed by the federal government to refinance an existing loan, Minister of Finance, Kemi Adeosun, said on Thursday that it would save the country about N91.65 billion per annum.

According to the finance minister who explained recently that the debt refinancing plan , was to help take care of the legal debts inherited from the immediate past government of Goodluck Jonathan which is the major component of the total $5.5 billion loan package being considered by the present government administration.

The minister also noted that the strategy would involve converting short term Treasury Bills into longer tenured international debt at single digits interest rates.

The statement from her office further expressed that about N76.375 billion would be saved every year from borrowing the other $2.5 billion component of the loan; making a total annual saving of about N168 billion from the $5.5 billion loan.

ALSO READ   Donald Duke Disagrees With Buhari, Says Recession Still Affecting Him, Nigerians

“The proposed refinancing of $3 billion worth of short term Treasury Bills into longer tenured international debt is expected to save N91.65 billion per annum,” she said.

Other attached benefits of the strategy, include improvement in the country’s foreign reserves through increased dollar inflow and reduction in domestic debt demand; as well as strengthening the maturity profile of the debt and reducing the rollover risk.

“This will significantly reduce the crowding-out of the private sector and support the aspirations of the monetary authorities to bring down interest rates in the country,” the minister explained.

The minister assured that the revenue and debt management strategy would mitigate the country’s debt service risks and fast-track the country’s development.

ALSO READ   United States Set To Supply Power To Nigeria, Says US Energy Secretary

The government does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plan, ERGP, over the medium term, is such that the Naira is expected to strengthen, she explained

Mrs. Adeosun said mobilising revenue to improve the debt service to revenue ratio was a key element of the economic reform strategy.

Welcoming the advice by the country’s international development partners, including the International Monetary Fund, she said this was being undertaken through a number of initiatives including the plugging of leakages and the deployment of technology revenue management systems.

She specifically cited the example of the health pay scheme, a pilot cashless revenue project in the health sector, which recorded material increases in revenue earnings.

She also look into the ongoing Voluntary Assets and Income Declaration Scheme, VAIDS, initiative by the Federal Inland Revenue Service, FIRS, expected to equally positively impact the level of tax collections.

ALSO READ   Togo - Economy Grows At 7.5% In 2016 - Ministry Of Economy And Finance

“The difference in our economic strategy is that we are changing the mix of revenue sources available to government from the traditional oil or debt to a combination of oil, debt and domestic revenue,” the minister added.

In the short term, the strategy would enable the debt service to revenue ratio to improve.

Refinancing of its inherited debt portfolio would lead to significant benefits, particularly through a reduction in cost of funds. The Minister revealed.

While government has been borrowing from domestic sources at about 16 per cent interest rate, Nigeria would be able to obtain the loans at a rate not exceeding 6 per cent per annum.

Leave A Comment Below
share on: