Nigerian govt. approves refinancing of domestic debt into $3 billion treasury bills
Nigerian govt. okays refinancing of domestic debt into $3 billion treasury bills
The Federal Executive Council, FEC, on Wednesday approved the refinancing of the country’s domestic debts into treasury bills worth $3 billion as part of the overall strategy of government to reduce the cost of borrowing.
The Minister of Finance, Kemi Adeosun, gave the indication while addressing State House Correspondents on the FEC meeting presided by Acting President Yemi Osinbajo.
According to her, the approval was derived from a memo her ministry presented to FEC to enable the federal government restructure its debt portfolio.
“The memo that I presented and was approved by council was part of our efforts to restructure our debt portfolio.
“We got approval in June that we would restructure our debt profile; we would borrow less in Naira and more in foreign currency because it is cheaper and also because we want to prevent crowding out the private sector.
“We want to create room for the private sector to be able to borrow so they can grow and create jobs.
“So as part of that, we sought approval and that was granted for us to refinance treasury bills.
“As treasury bills mature we will be refinancing them into dollars.
“Up to $3 billion worth of treasury bills will be refinanced into dollars.
“As the Naira treasury bills mature, we will be issuing dollar instruments.
“So, we are not increasing our borrowings; we simply are restructuring instead of borrowing naira we are bearing dollars.’’
The minister noted that the measure had the advantage of reducing cost of borrowing.
She noted that the average rate that the nation borrowed internationally did not exceed seven per cent, whereas in the treasury bills, it was between 13.6 per cent and 18.5 per cent.
Mrs. Adeosun said the country was almost reducing by half the cost of borrowing which was trying to relieve the pressure on debt service.
She recalled the controversy that the debt service of the country was very high, adding that the refinancing was to relieve the debt service.
She also said that by the measure, government would be extending the maturity profile of the debt.
According to her, the country’s treasury bills mature in maximum of 364 days while the borrowing will be taken out to up to three years.
She said that the expectation was that when the economy recovered, the country would be in a much better position to repay instead of just rolling over the debt as was being done at the moment.