From Juliana Taiwo-Obalonye, Abuja
The Federal Executive Council (FEC) presided over by Acting President, Yemi Osinbajo, has approved plans to issue $3 billion (about N900 billion) worth of bonds to refinance maturing government treasury bills.
The plan, which will soon go to the National Assembly for approval is meant to cut cost and extend debts maturity as well as relieve pressure on the country’s debt service.
This was even as Council approved 2018-2020 Medium Term Expenditure Framework (MTEF) Fiscal Strategy Paper.
The Minister of Finance, Kemi Adeosun, told State House Correspondents at the end of FEC meeting, which lasted about five hours yesterday, that this is not a new borrowing plan nor a plan to dollarise the economy but simply to exchange matured naira treasury bills for dollars, adding that the rate of borrowing currently at between 13 and 18.5 per cent will be halved to 7 per cent which is the average international borrowing rate.
“What we are simply doing is that as Nigerian government treasury bills mature, instead of rolling them over, which is what we have been doing, we are going to pay them off by the proceeds of dollar denominated bonds which we will be issuing and those bonds with three years maturity whereas the treasury bills are 91 to 364 days on average. So we’re taking short money and refinancing it long.”
The Finance Minister explained that the new development on Nigeria’s borrowing will also relieve the crowding out effect on the private sector and free up more cash for banks to lend to the private sector, adding that it will have a multiplier effect on job creation in the country.
“As you all know, we got an approval in June to restructure our debt and borrow less in naira and more in dollars because it is cheaper and we want to create room for the private sector to go and borrow so that they will be able to create jobs.
“So by reducing govt’s borrowing by $3 billion, we will be creating more rooms for banks to lend to the private sector and hopefully that will also create some downward pressure on interest rate, which we all agree needs to come down.”