The Federal Government has decided to borrow more from external sources to achieve its aim of stimulating the economy and providing critical infrastructure that the nation needs.
This was one of the decisions reached at a meeting of the Federal Executive Council held on Wednesday, during which a new debt management strategy was approved for the country.
The Minister of Information and Culture, Alhaji Lai Mohammed; Minister of Finance, Mrs. Kemi Adeosun; and Minister of State for Budget and National Planning, Mrs. Zainab Ahmed, briefed State House correspondents at the end of the meeting presided over by Vice-President Yemi Osinbajo.
President Muhammadu Buhari is currently away in London on a 10-day vacation.
Adeosun said the government decided to produce a new debt management strategy for 2016 to 2019 because the previous one expired in December 2015 and there was a need for a new one.
She said the new document also became necessary in view of the current economic challenges and the desire of the government to reflate and diversify the economy.
The minister explained that the government would embrace external borrowings because they were cost-effective and come with more beneficial terms.
She said, “We felt there was a need for a new debt management strategy and the strategy is based on the Medium Term Expenditure Framework as prepared and presented by the Ministry of Budget and National Planning. That MTEF assumed that we would reduce our domestic debt from one per cent of GDP to 0.7 per cent by 2019.
“The reason for this is that the government recognises that for the next three years, to really stimulate this economy and to provide the infrastructure that we need, we will need to be borrowing. We need to borrow at the most cost-effective rate and at the most cost-effective and beneficial terms.
“The government recognises that there is a need to stimulate the private sector. For the private sector to really grow, banks must lend to it; we don’t want government’s borrowing crowding out the private sector.
“Government has taken a strategic decision that, where possible, we will borrow more externally. That is the external debts in dollars or in any other currency, because the interest rates are cheaper, the tenures are longer and there is more room for banks to lend to the private sector, especially the SMEs. So, the strategy was approved by FEC after much debate.”
Adeosun said in approving it, the council noted that as the nation moved its debts to dollars, there was a need to focus more on exports, especially non-oil exports.
She said discussion was held on reforms that would be carried out in the Customs and other ministries to make it easier to export Nigerian agricultural produce and solid minerals. – Punch.
