Legacy debts account for $3bn of $5.5bn foreign loans –Adeosun
On Wednesday, Finance Minister Ms. Kemi Adeosun stated that the Federal Government would apply the sum of $ 3 billion to refinance debts inherited from the previous administration.
The spending is part of the $ 5.5 billion foreign loan obtained from international financial markets, according to the minister.
Adeosun, who appeared on a television program in Abuja, according to a statement made by his Special Media Adviser, Mr. Oluyinka Akintunde, said that the proposed $ 5.5bn loan consisted of the refinancing of equity debts for a sum of $ 3 billion and a new loan of $ 2.5 billion for the 2017 budget.
The minister said that the 2017 budget faced liquidity problems, which partly explained why the Federal Government sought to borrow $ 5.5bn from the international financial market.
She said the other reason was to get $ 3bn to refinance part of the domestic debt incurred by the government of President Goodluck Jonathan.
The minister said that under Jonathan, the country's debt increased from N7.9bn in June 2013 to N12.1bn in June 2015 even though "only 10% of the budget went to capital expenditures when the price of oil exceeded $ 120 per barrel. " "
This means that the country's debt increased by N4.2 billion in the last two years that preceded the accession of President Muhammadu Buhari to the Presidency on May 29, 2015.
Adeosun said: "Let me explain the $ 5.5bn loan because there have been some misrepresentations in the media in recent weeks. The first $ 2.5bn component represents the new external borrowing provided in the Appropriation Act of 2017 to partly fund the deficit in that budget.
"The debt will allow the country to close the gap in the 2017 budget that currently faces a liquidity problem to finance some capital projects.
"For the second component, we are refinancing the existing domestic debt with the $ 3 billion foreign loan.This is purely a portfolio restructuring activity that will not lead to any increase in public debt."
She added, "Under this dispensation, we are not borrowing to pay wages.If all we do is pay wages, we can not grow the economy.This administration is also working assiduously to return Nigeria to a stable economic base. In light of this, the government adopted an expansive fiscal policy with an expanded budget that will be financed in the short term through loans.
"Nigeria's debt to gross domestic product currently stands at 17.76 percent and compares favorably with all of its peers.The debt-to-GDP ratio of Ghana is 67.5 percent, Egypt is 92.3 percent, South Africa, 52 per cent, Germany 68.3 per cent and the United Kingdom 89.3 per cent.
"The relationship between Nigeria's debt and GDP is still within a reasonable threshold, and this administration will continue to apply a prudent debt strategy linked to gross capital formation, which will be achieved by driving capital spending on our diseased infrastructure, which in turn will release productivity and create the much needed jobs and growth. "
The minister emphasized that the administration led by Muhammadu Buhari was investing in critical infrastructure projects such as roads, railways and energy to deliver a fundamental structural change to the economy that would reduce the nation's exposure to crude oil.
He asserted that the $ 5.5 billion external loan was consistent with the Nigerian Debt Management Strategy, whose main objective was to increase external financing in order to rebalance the public debt portfolio in favor of long-term external financing.
Some experts, however, felt that the debt-to-GDP ratio was not the best way to measure a country's debt burden, saying that using the debt-to-income ratio provided a better proportion to measure the debt burden of a country. obligations.
In a telephone interview with our correspondent, a financial expert and Head of the Banking and Finance Department of Nasarawa State University, Dr. Uche Uwaleke, stated that the debt / income ratio was a better measure.
According to the associate professor, using the index is a better way to measure a country's ability to pay debts and interests. He, however, said the country barely had a better option than borrowing, but insisted that debts should be linked to self-liquidating projects.
Uwaleke said, "There is no doubt that the country's debt burden is high because of the debt-to-income ratio. There are other debt-burden measures, such as the debt-to-is now between 18 and 19 percent. "The debt-to-income ratio is a better measure, because it measures the country's ability to repay the money. we have in our debt burden is that we are bearing expensive local debts that are even short-term in nature. "The debt-to-income ratio increased from 35 percent in 2015 to 60 percent in 2016, according to world bank.
The spending is part of the $ 5.5 billion foreign loan obtained from international financial markets, according to the minister.
Adeosun, who appeared on a television program in Abuja, according to a statement made by his Special Media Adviser, Mr. Oluyinka Akintunde, said that the proposed $ 5.5bn loan consisted of the refinancing of equity debts for a sum of $ 3 billion and a new loan of $ 2.5 billion for the 2017 budget.
The minister said that the 2017 budget faced liquidity problems, which partly explained why the Federal Government sought to borrow $ 5.5bn from the international financial market.
She said the other reason was to get $ 3bn to refinance part of the domestic debt incurred by the government of President Goodluck Jonathan.
The minister said that under Jonathan, the country's debt increased from N7.9bn in June 2013 to N12.1bn in June 2015 even though "only 10% of the budget went to capital expenditures when the price of oil exceeded $ 120 per barrel. " "
This means that the country's debt increased by N4.2 billion in the last two years that preceded the accession of President Muhammadu Buhari to the Presidency on May 29, 2015.
Adeosun said: "Let me explain the $ 5.5bn loan because there have been some misrepresentations in the media in recent weeks. The first $ 2.5bn component represents the new external borrowing provided in the Appropriation Act of 2017 to partly fund the deficit in that budget.
"The debt will allow the country to close the gap in the 2017 budget that currently faces a liquidity problem to finance some capital projects.
"For the second component, we are refinancing the existing domestic debt with the $ 3 billion foreign loan.This is purely a portfolio restructuring activity that will not lead to any increase in public debt."
She added, "Under this dispensation, we are not borrowing to pay wages.If all we do is pay wages, we can not grow the economy.This administration is also working assiduously to return Nigeria to a stable economic base. In light of this, the government adopted an expansive fiscal policy with an expanded budget that will be financed in the short term through loans.
"Nigeria's debt to gross domestic product currently stands at 17.76 percent and compares favorably with all of its peers.The debt-to-GDP ratio of Ghana is 67.5 percent, Egypt is 92.3 percent, South Africa, 52 per cent, Germany 68.3 per cent and the United Kingdom 89.3 per cent.
"The relationship between Nigeria's debt and GDP is still within a reasonable threshold, and this administration will continue to apply a prudent debt strategy linked to gross capital formation, which will be achieved by driving capital spending on our diseased infrastructure, which in turn will release productivity and create the much needed jobs and growth. "
The minister emphasized that the administration led by Muhammadu Buhari was investing in critical infrastructure projects such as roads, railways and energy to deliver a fundamental structural change to the economy that would reduce the nation's exposure to crude oil.
He asserted that the $ 5.5 billion external loan was consistent with the Nigerian Debt Management Strategy, whose main objective was to increase external financing in order to rebalance the public debt portfolio in favor of long-term external financing.
Some experts, however, felt that the debt-to-GDP ratio was not the best way to measure a country's debt burden, saying that using the debt-to-income ratio provided a better proportion to measure the debt burden of a country. obligations.
In a telephone interview with our correspondent, a financial expert and Head of the Banking and Finance Department of Nasarawa State University, Dr. Uche Uwaleke, stated that the debt / income ratio was a better measure.
According to the associate professor, using the index is a better way to measure a country's ability to pay debts and interests. He, however, said the country barely had a better option than borrowing, but insisted that debts should be linked to self-liquidating projects.
Uwaleke said, "There is no doubt that the country's debt burden is high because of the debt-to-income ratio. There are other debt-burden measures, such as the debt-to-is now between 18 and 19 percent. "The debt-to-income ratio is a better measure, because it measures the country's ability to repay the money. we have in our debt burden is that we are bearing expensive local debts that are even short-term in nature. "The debt-to-income ratio increased from 35 percent in 2015 to 60 percent in 2016, according to world bank.
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