Adeosun Explains $5.5bn Foreign Loan Deal
…Insists Nigeria’s debt to GDP ratio is sound
BY COBHAM NSA, ABUJA – Minister of Finance, Mrs. Kemi Adeosun on Wednesday vowed that the Federal Government will disappoint critics with its prudent and transparent utilization of the $5.5bn foreign loan being sourced from the international financial markets.
Adeosun said of this amount, US$3 billion will be deployed to refinance legacy debts of the immediate past administration of former President Goodluck Ebele Jonathan.
Speaking on Arise TV’s News Programme, she explained that the proposed $5.5 billion loan whose request is currently before the National Assembly, comprises two components of refinancing inherited debts of about $3 billion as well as new borrowing of $2.5 billion for the 2017 Budget.
“Let me explain the $5.5 billion borrowing because there have been some misrepresentations in the media in the last few weeks. The first component of $2.5 billion, represents new external borrowing provided for in the 2017 Appropriation Act to part finance the deficit in that Budget”, she said.
According to her, “The borrowing will enable the country to bridge the gap in the 2017 budget currently facing liquidity problem to finance some capital projects.
On the second component, Mrs Adeosun stated thus; “we are refinancing existing domestic debt with the US$3 billion external borrowing. This is purely a portfolio restructuring activity that will not result in any increase in the public debt.”
Adeosun said it is puzzling that Nigeria’s debt profile skyrocketed from N7.9 trillion in June 2013 to about N12.1 trillion in June 2015, despite the fact that only 10 per cent of the budget was allocated to capital expenditure with oil price far above $120 per barrel.
The Finance Minister said the administration is investing hugely in critical infrastructural projects like roads, rails and power as part of efforts at delivering deep-seated structural change to the economy, especially in lessening the country’s continuous over-dependence on crude oil.
She said; “Under this dispensation, we are not borrowing to pay salaries. If all we do is to pay salaries, we cannot grow the economy. This Administration is also assiduously working to return Nigeria to a stable economic footing. In light of this, the Government adopted an expansionary fiscal policy with an enlarged budget that will be funded in the short term, by borrowing.”
Assurances also came from her that the US$5.5 billion foreign borrowing is in line with Nigeria’s Debt Management Strategy, whose main objective focuses on boosting external financing in order to rebalance the public debt portfolio in favour of long-term external financing.
For the Minister, “Nigeria’s debt to Gross Domestic Product (GDP) currently stands at 17.76% and compares favourably to all its peers. The debt to GDP ratio for Ghana is 67.5%, Egypt is 92.3%, South Africa (52%), Germany (68.3%) and United Kingdom (89.3%)”, adding that; “Nigeria’s debt to GDP ratio is still within a reasonable threshold.”
She said President Buhari’s administration is resolute in ensuring prudent debt strategy tied to gross capital formation, adding; “This will be attained by driving capital expenditure in our ailing infrastructure which will in turn, unlock productivity and create the much-needed jobs and growth.”
