Published on Aug 11, 2017 Greenbarge Reporters
The Federal Government has approved the refinancing of part of the country’s domestic debt through external borrowing.
Minister of Finance, Mrs. Kemi Adeosun, spoke to news men shortly after the Federal Executive Council (FEC) meeting, yesterday, allayed fears in financial circle, of increased borrowing, saying that instead of borrowing Naira: “we are now borrowing dollars and at a cheaper rate.”
The approval followed a proposal by the Debt Management Office (DMO) for the refinancing of part of the country’s domestic debts, particularly Nigerian Treasury Bills (NTBs), through the borrowing of $3 billion.
The minister said that the move was informed by the lower US Dollar interest rates in the International Capital Market (ICM), with Nigeria expected to borrow at a rate not higher than 7%.
This was even as issuances of the NTBs in the domestic market are at rates as high as 18.53%, making external borrowing cheaper by about 12%. Analysts agree that the implementation of the refinancing will result in substantial cost savings for the FGN in debt service costs.
They noted that reduction in the cost of borrowing, the $3 billion is expected to be raised for a tenor of up to 15 years, which is very long compared to the maximum tenor of 364 days for NTBs.
“This move will effectively extend the tenor of the government’s debt portfolio. The longer tenor enables the Government to repay at a time when the economy would be stronger and more diversified, to meet the obligations.
“The reduction in the level of the FGN’s borrowing from the domestic market would result in a reduction in domestic interest rates and free up borrowing space in the economy, particularly for private sector borrowers.
“The $3billion from the refinancing will also represent an injection of foreign exchange into the economy which will boost the country’s external reserves.
“The approval of the National Assembly will be obtained for the proposed refinancing before implementation in line with the Debt Management Office, Act 2003.”
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