The Federal Government has approved a new debt management strategy to guard government’s lending from 2016 to 2019 with a nod for more external borrowing, Nigeria’s Finance Minister, Kemi Adeosun said Wednesday.

This is to allow local banks focus on lending to Small and Medium Enterprises (SMEs) for accelerated infrastructure development.
Nigeria’s external debt profile is expected to increase. The Debt Management Office, put the country’s external debt profile at $11 billion as at October 2015 as against the $ 9.4 billion recorded in March 2015.

Already, the government plans to borrow N984billion from domestic sources and N900billion from foreign sources to finance the capital component of the 2016 expenditure.

To get more forex to be able to pay up the debt which will mostly be longterm, government intends to carryout reforms of strategic policies that will make for ease of export of made in Nigeria goods especially agricultural produce and solid minerals.
“government recognises that for the next 3 years to really stimulate this economy and to provide the infrastructure that we need, we would need to be borrowing.

“We need to borrow at the most cost effective rate and at the most cost effective and beneficial terms. And also the government recognises that there is a need to stimulate the private sector, for the private sector to really grow banks must lend to the private sector so we don’t want government borrowing crowding out the private sector.

“Government has taken a strategic decision that where possible we would borrow more externally. That is the external debts in dollars or in any other currencies because the interest rates are cheaper, the tenures are longer and there is more room for banks to lend to the private sector especially SMEs,” minister Adeosun said.

“FEC made it very clear that we must make sure that our costs are low and manage the foreign exchange risks. They agreed that it is cheaper to borrow externally but we must manage the risk involved” she added .

Briefing newsmen after the Federal Executive Council meeting which was chaired by Vice President Yemi Osinbajo, Adeosun alongside the minister of state for budget and national planning, Zainab Ahmed, said the new strategy was approved after much debate.
Nigeria’s debt would now be moved to dollar components as government plans to focus more on non oil exports and discussion was held around how to make export easier.

“There was a lot of discussions around reforms that we would be needing in customs and other ministries to make it easier to export Nigerian goods and agricultural produce and solid minerals that there is demand at the moment.

Some of the bottle necks that exits in customs and those under quarantine need to be removed. If we do this that would create foreign exchange earnings so that these borrowings which are in dollars when they need to be repaid we would have dollar revenues to pay them” the Finance minister said.

Council also discussed the issue of multilateral loans from agencies like the World Bank, African Development Bank (ADB) and so on, noting that most of the agreements were not optimal. She said Nigeria should be confident enough to negotiate with some of these multilateral agencies to make sure that “those loans we take either from the world bank or ADB are on terms that are advantageous to Nigerians. FEC unanimously supported us and mandated the ministry of Finance which is the main negotiator that henceforth such loans will need to be structured so that they benefit Nigerians”.

FEC also agreed that there will be new instruments in the domestic market, particularly sinking bonds, infrastructure bonds and inflation linked bonds to deepen the domestic market and create greater opportunity in the domestic market.

http://businessdayonline.com/2016/06/fgs-external-debt-profile-to-increase-as-it-shifts-focus-to-allow-local-banks-lend-to-smes/