Minister of Finance, Ngozi Okonjo Iweala
The Federal Government Monday proposed a portfolio of concessionary loans totalling $9.3 billion under its 2012-2014 Medium Term External Borrowing Plan and requested the National Assembly to consider and approve it.
The proposal consists of an initial request of $7.9 billion which has been pending before the parliament and an additional $1.4 billion comprising a $300 million loan for water supply schemes in selected states, a $1 billion Euro bond and $100 million Diaspora bond which will be issued next year.
As at September 30, 2012, Nigeria's external debt stock stood at $6.2 billion, while her domestic debt was put at N6.3 trillion.
Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, unveiled the new borrowing plan at a meeting with the members of the House Committee on Aids, Loans and Debts who had invited her to clarify the position of the executive on external borrowings.
The minister appeared alongside the Director General, Debt Management Office (DMO), Dr. Abraham Nwankwo, and other top officials of the Federal Ministry of Finance.
She allayed the fears of the lawmakers that Nigeria was returning to the old era of amassing huge external debts, just a few years after she exited from the grip of the Paris Club.
She explained that the loans were not only necessary for the Nigerian economy to grow but have been negotiated with multilateral institutions on highly concessionary terms.
Okonjo-Iweala said that having been involved in Nigeria's struggle to exit the Paris Club at great pains in 2005, it would be unthinkable for her to lead an Economic Management Team that would drag Nigeria back to that unfortunate economic era when Nigeria groaned under the debt burden.
According to her, the country’s debt to GDP ratio would remain at a sustainable level of about 18.87 per cent, even with the new loans.
“We are proposing three amendments to this external borrowing plan. We have an amendment to provide for a water supply project in Rivers State to the tune of $200 million
“This will be supported through the ADB (Africa Development Bank) through a concessionary loan with a 40-year maturity, 10-year moratorium and at 0.7 per cent interest rate.
“We also propose to swap some of the existing loans in this plan to take them out and substitute in their place, a facility to kick start a Housing Mortgage Finance Scheme in Nigeria to the tune of about $300 million.
“The final thing is for a Euro-bond issue of $1 billion. You will recall that during President Umaru Musa Yar'Adua's administration, plans were initiated for the first Euro-Bond.
“Preparation started and it was successfully floated at the beginning of January 2011. It was highly successful and was 200 per cent over subscribed.
“So this Euro-bond is a continuation of what was started by the previous regime and we just wanted to bring that to your attention that in addition to this borrowing plan, there is a plan for Euro-bond of a billion dollars.
“There is also a $100 million Diaspora bond to attract Nigerians in the Diaspora to bring their money back to invest in infrastructure,” she said.
On the vexed issue of an appropriate benchmark for the price of crude oil in the 2013 budget, Okonjo-Iweala appealed to the lawmakers not to politicise the issue but to look at it from its technical and professional nature.
In other countries like Chile, she said, the benchmark for copper, the main product of the economy, is determined by a special technical board assembled for that purpose and not subjected to debate in parliament.
She said going forward, Nigeria may have to assemble such a technical team to determine the oil benchmark to save the nation the time wasted in haggling over the benchmark of oil every year.
“I urge our lawmakers to bear with us because the oil benchmark is purely a professional and technical issue underpinned by a model. It is not a political issue and I think we should not politicise it,” she said.