Ebun Francis || Nigeria’s finance minister, Kemi Adeosun has said that the $3 billion out of the $5.5 billion loan request President Muhammadu Buhari sent to the Senate for approval will be used to service debts inherited from former President Goodluck Jonathan administration.
The remaining $2.5 billion will be used to finance capital projects in the 2017 budgets.
Adeosun made the clarification while answering questions on Arise Television.
“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.”
According to Adeosun, it is puzzling 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.
“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 minister explained that the $5.5 billion foreign borrowing was consistent with Nigeria’s debt management strategy, which main objective is to increase external financing with a view to rebalancing 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%),” she said.
“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 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.”