The Minister of Finance, Kemi Adeosun, has said the latest controversial loan request of $5.5 billion, was major to re-finance debts incurred by the administration of former President, Goodluck Jonathan; adding that, the Federal Government would spend $3 billion refinancing debts from the Jonathan administration.
The Minister, said the $5.5 billion loan which Buhari was seeking approval of the National Assembly for, was made up of two components – re-financing of heritage debts to the tune of $3 billion, and new borrowing of $2.5 billion for the 2017 budget.
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“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.
“The borrowing will enable the country to bridge the gap in the 2017 budget, currently facing liquidity problem to finance some capital projects.
“For the second component, 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.
She added that it was shocking that Nigeria’s debt rose from N7.9 trillion in June, 2013, to N12.1 trillion in June 2015, despite the fact that only 10% was allocated to capital expenditure, when oil price exceeded $120 per barrel.
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“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”, the Finance Minister noted.
She said the $5.5 billion foreign borrowing was in sync with Nigeria’s debt management strategy, the main objective of which was to increase external financing, with a view to re-balancing the public debt portfolio in favour of long-term external financing.
“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%).
“Nigeria’s debt to GDP ratio is still within a reasonable threshold. This administration will continue to pursue a prudent debt strategy that is tied to the gross capital formation. 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.
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