BY COBHAM NSA, ABUJA – The Minister of Finance, Mrs. Kemi Adeosun has allayed fears over Nigeria’s current debt profile, assuring that government debt management strategy is safe and the alarm bell sounded by some critics is needless.
She said the Federal Government has evolved a revenue and debt management strategy aimed at easing the country’s debt service risk as well as fast-track sustainable economic growth and development.
Mrs Adeosun maintained that the strategy sets out to achieve several objectives that include: mobilising revenue and reducing the debt burden by lengthening the maturity profile; increasing foreign exchange reserves; reducing crowding-out of the private sector; and creating savings in debt service cost.
The Minister, who acknowledged assertions by international development partners, including the International Monetary Fund (IMF), said a key element of government’s economic reform strategy is mobilizing revenue to improve its debt service to revenue ratio.
According to her, the reform is being undertaken through a number of initiatives that include; plugging of leakages and deploying technology for revenue management, even as she specifically cited the Health Pay, a pilot cashless revenue project in the health sector that has resulted in huge material raise in government earnings.
Adeosun also said the on-going Voluntary Assets and Income Declaration Scheme (VAIDS) is likewise projected to positively impact on the level of tax collections, adding that; “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 further said; “This is a long term strategic reform which is critical to our future economic growth and in the short term will enable our debt service to revenue ratio to improve.”
Similarly, Mrs Adeosun said government is working on refinancing its inherited debt portfolio, adding that this will lead to significant economic benefits, especially as it pertains to reduction in costs of funds.
She explained that “The proposed refinancing of US$3Bn worth of short terms Treasury Bills into longer tenured international debt is expected to save N91.65 billion per annum”, adding that; “Other benefits of our revenue and debt management strategy include: improvement in foreign reserves as well as reduced domestic debt demand, which will reduce crowding-out of the private sector and support the aspirations of the monetary authorities to bring down interest rates.”
The Government, according to her, does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plans (ERGP) reforms, over the medium term, is such that the Naira is expected to strengthen.
BENEFITS OF GOVERNMENT’S REVENUE AND DEBT MANAGEMENT STRATEGY
|
1. |
Savings in Debt Service Cost |
N76.375 billion per annum from US$2.5bn borrowing N91.65 billion per annum from US$3 billion refinancing of short-term domestic debt |
|
2. |
Foreign Reserves |
Boost in foreign reserves with increased dollar inflow |
|
3 |
Lengthening of Maturity Profile | Reduce Debt Burden and Rollover Risk |
| 4. | Crowding-out of the Private Sector |
Creates space for borrowing by the private sector |
