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Debt Burden: FG Nurses a $9.3bn External Borrowing Plan

By on November 6, 2012

 

The Federal Government under its 2012-2014 Medium Term External Borrowing Plan forwarded a request to the National Assembly for consideration and approval for its portfolio of concessionary loans totaling $9.3 billion.

 

The proposal comprises of an earlier request of $7.9 billion still pending before the parliament, a $1.4 billion comprising, $1 billion Euro bond and $100 million Diaspora bond to be issued next year.

 

On the other side, the bad news is, as at September 30, 2012, Nigeria had an external debt figure of $6.2 billion and a domestic debt figure of N6.3 trillion, which analysts stressed, would weigh down the economy.

 

Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, disclosed this at a meeting when she was invited by the House Committee on Aids, Loans, and Debts to clarify the position of the executive on external borrowings.

 

The Minister was accompanied by the Director General, Debt Management Office (DMO), Dr. Abraham Nwankwo, and some officials of the Federal Ministry of Finance.

 

In a bid to thwart agitations that Nigeria was returning to its golden borrowing era she said the loans will not have negative effects on the economy, besides she explained that were not only necessary for the Nigerian economy but also for multilateral institutions on highly concessionary terms.

 

She said she would never lead Nigeria back to that unfortunate economic era when Nigeria groaned under the debt burden, adding that she felt the pains involved in the struggle to exit the Paris Club in 2005, so she was not at the verge of dragging the country to desperation.

 

She said even with additional loans the country’s debt to GDP ratio would remain at a sustainable level of about 18.87 per cent.

“We are proposing three amendments to this external borrowing plan. We have an amendment to provide for a water supply project in Rivers State to the tune of $200 million

.

“This will be supported through the ADB (Africa Development Bank) through a concessionary loan with a 40-year maturity, 10-year moratorium and at 0.7 per cent interest rate.

 

“We also propose to swap some of the existing loans in this plan to take them out and substitute in their place, a facility to kick start a Housing Mortgage Finance Scheme in Nigeria to the tune of about $300 million.

“The final thing is for a Euro-bond issue of $1 billion. You will recall that during President Umaru Musa Yar’Adua’s administration, plans were initiated for the first Euro-Bond.

 

“Preparation started and it was successfully floated at the beginning of January 2011. It was highly successful and was 200 per cent over subscribed.

 

“So this Euro-bond is a continuation of what was started by the previous regime and we just wanted to bring that to your attention that in addition to this borrowing plan, there is a plan for Euro-bond of a billion dollars.

“There is also a $100 million Diaspora bond to attract Nigerians in the Diaspora to bring their money back to invest in infrastructure,” she said.

 

Regarding the much debated issue of appropriate benchmark for the price of crude oil in the 2013 budget, she called on  the law makers not to politicise the issue for evaluate the technicalities involved with professionalism.

 

In her explanation, she cited example-using Chile, as one of the countries that the benchmark for copper is determined by a special technical board assembled for that purpose and not subjected to debate in parliament.

Adding that in time to come Nigeria will need such a team to deliberate and determine the oil benchmark to save the country the time wasted over the issue.

 

 

“I urge our lawmakers to bear with us because the oil benchmark is purely a professional and technical issue underpinned by a model. It is not a political issue and I think we should not politicise it,” she said.

One Comment

  1. Nura Mohameed Kamfut

    November 6, 2012 at 9:07 am

    Inspite of our numerous problems?