The Minister of Finance, Mrs. Kemi Adeosun, Monday revealed government’s strategy for foreign loans that will be used to fund the 2016 budget.
According to a statement from the ministry issued by the Special Adviser to the Minister on Media Matters, Mr. Festus Akanbi, Mrs Adeosun disclosed that one of the options the federal government will explore will be to get credit from multi-lateral agencies like the World Bank and African Development Bank (AfDB).
“These Multilateral agencies provide loans on concessional terms, which include low interest, moratorium before repayment and long tenor.”
“The second funding option being explored includes Export Credit Agencies such as China Exim Bank. These funds are also concessional and are tied to specific capital projects,” the statement said.
The balance of foreign borrowing required will be raised in the Eurobond market at commercial rates of interest.
The Minister explained that by blending these different sources of funding, the overall cost of funds will be maintained at the lowest possible level, stating that “as far as possible, our foreign borrowing will be tied to specific capital projects.
A number of these projects are revenue generating which will be used to fund the loan repayments.”
These capital projects include power, transport, road; housing etc. These capital projects include power, transport, road, housing etc.
The strategy of pursuing increased foreign borrowing is designed to ensure that the Federal Government does not “crowd out” the private sector in the domestic market.