Africa > West Africa > Nigeria > Nigeria: Govt to Refinance $3bn Local Loans With Dollar Debt

Nigeria: Nigeria: Govt to Refinance $3bn Local Loans With Dollar Debt

2017/08/11

Nigeria plans to refinance $3 billion worth of maturing naira-denominated short-term treasury bills with dollar borrowing of up to three years' maturity, to lower costs and improve its deficit position as the economy recovers from a recession.

Finance Minister Kemi Adeosun said on Wednesday she was aiming to borrow less in naira and additional in foreign currency. She said the government could borrow at a cost of 7 % overseas, roughly half the interest rate it currently pays locally.

"As the economy recovers and grows we will be in a much better position to repay instead of just rolling over the deficit," she told reporters next a cabinet conference where the government approved a spending plan for 2018-2020.

Dollars have been in short supply in Nigeria since the price of crude oil, the major source of hard currency, plunged in mid-2014, triggering a currency crisis, an exodus of foreign investors and its initial recession in 25-years.

The government expects the economy to recover this year and grow by 2.2 %. The International Monetary Fund sees just 0.8 % increase.

Adeosun said the government was aiming to restructure its deficit portfolio into longer term maturities by borrowing additional offshore and less at home to lower cost and as well support private sector access to credit to boost the economy.

Adeosun said the government would issue dollar deficit as $3 billion worth of naira treasury bills mature. She did not provide a timeframe for this.

Nigeria expects a shortfall of $7.5 billion for its 2017 budget. It expects to raise around half of that in foreign loans inclunding from the World Bank and from international deficit markets.

"We are not increasing our borrowings. We are simply restructuring. Instead of owing naira, we will be owing dollars," Adeosun said.

At the briefing, Udoma Udo Udoma, minister for budget and national planing said the government had approved "a slightly different" increase trajectory of 3.5 % for next year, down from 4.8 % it announced last week in its strategy paper.

Udoma estimate increase would top 4.5 % by 2019 and 7 % by 2020, adding that the government was projecting 2.3 million barrels per day crude production for next year at a price of $45 a barrel.

He said the government was committed to exploring ways of raising additional revenues to lower the deficit service burden.

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