The Federal Executive Council (FEC) presided over by President Goodluck Jonathan ratified an earlier approval given to the Federal Ministry of Finance to borrow $170 million (N272 billion) from the French Development Agency to beef up power infrastructure in the Federal Capital Territory (FCT), Abuja.
The Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala alongside Minister of Information, Labaran Maku told State House correspondents at the end of the meeting that loan was taken
to undertake 270 kilometer transmission lines and the construction of additional substations within the FCT and to build additional power substations in the FCT to boost power supply in the FCT.
She said the loan is usually given on exceptionally concessionary grounds to developing and friendly countries by the French government.
According to her, following discussions by both President Jonathan and French President, Francois Hollande, “the two leaders accepted the need for this loan, which is to support the power infrastructure in Abuja. Abuja is one of the fastest growing cities in the world and certainly the fastest growing city in the continent of Africa. We need to continually update infrastructure particularly power supply to the city as it expands from the city centre outwards. We are happy because this loan was taken and it shows the confidence of the French government in the Nigerian economy”.
The Finance Minister said, “This was one of the loans that was signed when the French President came for the centenary celebrations, because we had an anticipatory ratification from the President and it was ratified today by council. So $170 million of very soft credit. The terms include 1.56% interest rate per annum, commitment charge of 0.5% per annum and then a service charge of 0.25% per annum payable on the amount withdrawn. The loan is for 20 years with a seven years grace period that means moratorium on payment for seven years and the rest payable over twenty years.
“This will help to boost our transmission. As you know the ministry of power has set forward an emergency transmission programme for the entire country requiring $1.9 billion and we have been able to raise $1.2 billion so far of very soft credits. This $170million from the French development agency is part of that package. The balance of the package comes from the World Bank, $700 million and the Japanese $200million. We have been able to raise that all very soft credits.
“This project has been approved in the borrowing plan since 2010 but after it was approved very early on, it was shelved until we asked the French development agency to renew it and fastrack it and that is how we came to approve that today”.
Also Council ratified diaspora bond of about $100 to 300million to enable Nigerians living abroad to invest in the country.
Okonjo-Iweala said the bond is in continuation of the President’s promise to involve all Nigerians particularly in the diaspora, in the transformation agenda.
According to her, “There were two things that were approved in the diaspora bond and the N80 billion what we call Global Depository Notes.
“We have asked to be able to engage Nigerians as Mr. President wants Nigerians who are on the outside, they are very much desirous of engaging in the building of infrastructure and investment in the country, in an organised fashion.
“The size of the bond will be anywhere from $100-$300 million and the idea is to have them invest this in infrastructure basically in the country so it wil be in an infrastructure that most of them can see and feel and that is what many of them in our soundings from the diaspora abroad have said they will like to invest in this.
“Now we are asking for approval to appoint all the consultants and the transaction parties as we call them who will be able to assist us on this bond.
Very few countries have been able to float a diaspora bond successfully. The best two examples are Israel and India.
“The second aspect is N80 billion of federal goverment bonds. This is part of our regular borrowing programme for this year, so we are not adding anything to it. Out of the N522 billion we said we will borrow this year to help finance the budget we are saying N80 billion we are going to float it in something called Global Depository Notes.
“This is an arrangement you make when you want to diversify and enlarge the universe of those nesting in your bonds. You work with an international bank that can issue this notes to people outside. They may be foreign investors who want to invest in Nigeria but their laws do not allow them to invest directly in another domestic currency. What they do is working with these international bank, the international bank can arrange to have them facilitate the investment in our own naira by issuing this notes which they can then invest in and purchase.
“We will be working with several international and also local organizations who will be helping us.
There are quiet a list of them who have through competitive means been recruited to work with us on this. Goldman Sachs, Arnold and Port, Nigerian advisers we have Stanbic IBTC, legal adviser Nigeria Olaniwo and Ajayi, Banwo and Ighodalo etc”.
