File: Kemi Adeosun; Minister of Finance
The Federal Government has resolved to adopt more of externally borrowing strategy to achieve its aim of stimulating the economy and providing the 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, Kemi Adeosun; and the Minister of State, Budget and National Planning, 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 had expired in December 2015 and there was a need for a new one.
She said the document was also produced given the current economic challenges and then the economic circus of the government to reflate and diversify the economy.
She explained that the government would be embracing external borrowings because they are more cost effective and they 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 percent of GDP to 0.7 percent 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 would need to be borrowing.
“We need to borrow at the most cost-effective rate 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 the private sector so we don’t want government borrowing crowding out the private sector.
“Government had taken a strategic decision that, where possible, we would borrow more externally. That is the external debts in dollars or in any other currencies because the interest rates are cheaper, the tenures are longer and there is more room for banks to lend to the private sector especially SMEs. So the strategy was approved by FEC after much debate.”