Nigeria’s finance Minister, Kemi Adeosun, said on Monday that the overall objective
of foreign loans being explored in the 2016 budget is to provide the lowest possible cost of financing for capital projects proposed under the government’s plan to stimulate the economy. These capital projects include power, transport, road, housing etc.
In a statement released on Monday night, Adeosun explained that funding options are being explored with multi-lateral agencies including the World Bank and African Development Bank (AfDB) are being explored. Multilateral agencies provide loans on concessional terms, which include low interest, moratorium before repayment and long tenor.
The second funding option being explored includes Export Credit Agencies such as China Exim Bank. And according to the statement signed by Adeosun ‘s Special Adviser on Media, Festus Akanbi, funds are also concessional and are tied to specific capital projects.
The Federal Government has presented to the National Assembly a budget of N6.08 trillion with a N2.2 trillion deficit and a N1.8 trillion borrowing requirement.
Adeosun said the need to invest in infrastructure to stimulate the economy and the long-term payback period of capital projects demands that the lowest cost of funds be obtained.
She further stated that the balance of foreign borrowing required will be raised in the Eurobond market at commercial rates of interest.
The Minister explained that by blending these different sources of funding, the overall cost of funds will be maintained at the lowest possible level. She further stated, “As far as possible, our foreign borrowing will be tied to specific capital projects. A number of these projects are revenue generating which will be used to fund the loan repayments,” she explained.
The strategy of pursuing increased foreign borrowing is designed to ensure that the Federal Government does not “crowd out” the private sector in the domestic market.
Onyinye Nwachukwu
