Federal government has devised a new debt strategy to mitigate the country’s debt service risk, fast-track her development and save about N91.6 billion annually on the $3 billion re-financing loan.
Mrs. Kemi Adeosun, Minister of Finance, making this known, said government’s decision to refinance its inherited debt portfolio would lead to a reduction in costs of funds, among several other benefits.
A statement issued Wednesday in Abuja by Mr. Oluyinka Akintunde, her media adviser, the minister said “The proposed refinancing of US$3Bn worth of short terms Treasury Bills into longer tenured international debt is expected to save N91.65 billion per annum.
“Other benefits of our revenue and debt management strategy include: improvement in foreign reserves as well as reduced domestic debt demand, which will reduce crowding-out of the private sector and support the aspirations of the monetary authorities to bring down interest rates,” the Minister added.”
Explaining that the strategy would boost dollar inflow and increase the nation’s foreign reserve, Adeosun welcomed the advice of Nigeria’s international development partners, including the International Monetary Fund that the strategy would achieve a number of objectives: mobilising revenue whilst reducing the debt burden by lengthening the maturity profile, increasing foreign exchange reserves, reducing crowding-out of the private sector and creating savings in debt service cost.
Mrs. Adeosun reasoned that a key element of the economic reform strategy was the mobilisation of revenue to improve the debt service to revenue ratio.
“This is being undertaken through a number of initiatives including, the plugging of leakages and the deployment of technology revenue management,” she said.
The minister specifically cited the Health Pay, a pilot cashless revenue project in the health sector, which recorded material increases in revenue, noting “The ongoing Voluntary Assets and Income Declaration Scheme (VAIDS) were equally expected to impact positively the level of tax collections.”
According to her, “The difference in our economic strategy is that we are changing the mix of revenue sources available to government from the traditional oil or debt to a combination of oil, debt and domestic revenue.
This is a long term strategic reform which is critical to our future economic growth and in the short term will enable our debt service to revenue ratio to improve.”
“The Government”, according to her, “does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plans (ERGP) reforms, over the medium term is such that the naira is expected to strengthen.”
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