Against the backdrop of ongoing criticisms and “misrepresentations” and “misconceptions” that have greeted the Federal Government’s plan to borrow $5.5bn, Finance Minister, Mrs. Kemi Adeosun, on Wednesday, took to her personal twitter handle @HMKemiAdeosun to explain the Federal Government’s debt strategy.
The $5.5bn external borrowing, she said, is divided into $2.5bn of new external borrowing to part finance deficit in the 2017 budget, while the remaining $3bn “is purely for refinancing existing domestic debt.”
In effect, she continued, the size of Nigeria’s total public debt does not change, except that it is restructured from domestic to foreign debt, which usually are long dated, rather than short and medium-term, reducing servicing pressure on the government.
“The US$5.5bn external borrowing is consistent with our Debt Management Strategy, whose main objective is to rebalance the public debt portfolio away from domestic and in favour of long-term external financing,” she stressed.
In the medium term, the Minister continued, Nigeria’s debt strategy focuses more external borrowing so as to avoid crowding out the private sector, while reduce the cost of debt servicing.
She reiterated her earlier explanation that the administration is “shifting focus away from domestic borrowing to cheaper and long-term external borrowing.”