The Federal Executive Council (FEC) on Wednesday approved the refinancing of the country’s domestic debts into treasury bills worth $3 billion as part of the overall strategy of government to reduce the cost of borrowing.
The Minister of Finance, Mrs Kemi Adeosun, gave the indication while briefing state House Correspondents on the FEC meeting today presided over by Acting President Yemi Osinbajo.
“We got approval in June that we would restructure our debt profile, we would borrow less in Naira and more in foreign currency because it is cheaper and also because we want to prevent crowding out the private sector.
“We want to create room for the private sector to be able to borrow so they can grow and create jobs.
“So as part of that we sought approval and that was granted for us to refinance treasury bills.
“As treasury bills mature we will be refinancing them into 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 instruments.
“So we are not increasing our borrowings, we simply are restructuring instead of borrowing naira we are borrowing dollars,’’ Adeosun said
Adeosun stated that the country was almost reducing by half the cost of borrowing which was trying to relieve the pressure on debt service.
Adeosun also said the country’s treasury bills mature in maximum of 364 days while the borrowing will be taken out to up to three years.
She said that the expectation was that when the economy recovered the country would be in a much better position to repay instead of just rolling over the debt as was being done at the moment.
The minister hoped that this will also create some downward pressure on interest rates.
“On the impact on the naira it is actually positive because what it means is effectively $3 billion will be coming in to our foreign reserves,’’ the minister stated.
Also speaking, the Minister of budget and National Planning, Mr Udoma Udo Udoma, said FEC approved the Medium Term Expenditure Framework (MTEF) 2017 to 2020 and fiscal strategy paper.
Udoma stated that in the past weeks, government was having consultations with the governors, public and members of the National Assembly on MTEF.
He said the highlight of the approval was that the government was committed to achieving a seven per cent growth rate by 2020 at the end of the three-year plan in accordance with the economic recovery and growth plan.
Udoma said that the trajectory of getting to seven percent was that the target for 2018 would be 3.5 per cent growth rate, 4.5 per cent in 2019 and 7 per cent in 2020.
He said there was a projection of 2.3 million barrels per day of oil production for 2018 made up of 1.8 million bpd with regular crude and 500,000 bpd of condensate and crude oil price projection of $45 dollars.
“We are also committed in the MTEF FSP to explore ways of raising additional revenues to reduce the debt service to revenue ratio.
“It is part of the policy of this government to make sure that out borrowing is controlled and to keep a reasonable debt service to revenue ratio which will help to bring down interest rate,’’ he explained
In his contribution, the Minister of Communication, Mr Adebayo Shittu, said the council approved N100billion loan facility for the execution of the National ICT Infrastructure Backbone project, known as NEPTEC 2.
He said the project would be financed by the China EXIM bank.
According to him, the project is domiciled within the Galaxy Backbone limited and will provide wide connectivity of all government offices, including Ministries, Departments and Agencies (MDAs) across the country.