THE Federal Government is now to more in foreign currencies as it bids to restructure it loans in order to make them cheaper to repay.
Minister of Finance, Mrs Kemi Adeosun, revealed this while briefing State House correspondents on the outcome of Wednesday’s meeting of the Federal Executive Council (FEC) presided over by Acting President Yemi Osinbajo in Abuja.
She said it did not mean that government would borrow more as there was already outcry about mounting debt profile.
According to her, government would finance treasury bills as they mature to the tune of $3billion.
She said: “The memo that I presented and was approved by council was as part of efforts to restructure our debt portfolio.
“We got an approval in June to restructure our debt profile, we will borrow less in naira and more in foreign currency because it’s cheaper and we want to prevent crowding out the private sector.
“We want to create room for the private sector so that they can borrow and create more jobs.
“So, as part of that, we sought approval and that was granted for us to refinance treasury bills.
“We will finance treasury bills as treasury bills mature. We will be financing them in 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 instrument.
“We are not increasing our borrowings. We are simply restructuring.
“Instead of owing naira, we will be owing dollars and the advantage to that one is cost reduction. The average rate we borrow internationally doesn’t exceed 7%
“Our treasury bills, we are paying between 13.6 and 18.5. They are almost halving the cost of borrowing.
“We are trying to relieve the pressure on debt services. As you know, there are a lot of controversies that our debt profile is very high and one of the things we are trying to do to relieve is to refinance.”
She also said that the second thing was extend the maturity of the treasury bills which matures in a maximum 364 days.
She added: “We will be taking that borrowing to 3 Years and the expectations is that as the economy recovers and grows, we will be in a much better position to repay instead of rolling over the debt which we are doing at the moment.
“The third thing is that by reducing government borrowing to the tune of $3billion we create more room for banks to lend to the private sector and hopefully that will also create some downward pressure on the interest rate.
“We want to borrow as much in naira and hopefully that will begin to put pressure on the interest rate which we will agree have to come down.
“So, that was the approval that was given and that is part of our overall strategy which aims to reduce borrowing.”
Also speaking at the briefing, Minister of Budget and National Planning, Udoma Udoma, said Council today approved a memorandum on the 2018-2020 Medium Term Expenditure Framework (MTEF).
He said: “As we know, we have been having extensive consultation in the last few weeks with the governors, members of the public, leadership of the National Assembly about the MTEF.
“So, we submitted it and was approved by council. The highlight of it is that we have committed to achieving a 7% growth rate by 2020 at the end of the three year plan in accordance with the Economic Recovery and Growth Plan.
“MTEF is based on the economic recovery and growth plan and in terms of the trajectory of getting the 7%, we have approved a slightly different trajectory in the sense that by next year, our target is 3.5% in 2018, in 2019, it will be 4.5% growth rate and of course in 2020, it will be 7% growth rate.
“In terms of crude oil production, our estimate projection for next year is 2.3 million barrels per day.
“We expect it to be broken down to 1.8million barrels per day regular crude and 500 thousand barrels per day in terms of condensate.
“The price we projected for next year is $45. We are also committed in the MTEF to explore ways of raising additional revenue to reduce debt service to revenue ratio.
“As the Minister of Finance said that is part of the policy of this government to make sure that borrowing is controlled and to make sure to keep a reasonable debt service to revenue ratio which will of course help to bring down interest rates.”
In his own remarks, Minister of Communications, Adebayo Shittu, said Council considered and approved a memo for the national ICT infrastructural backbone project.
He noted that it is popularly called NIPTI 2 and it is domiciled within the Galaxy backbone.
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