- FG Approves MTEF, Targets 7% Growth by 2020
The Federal Executive Council on Wednesday approved the 2018-2020 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which hopes to achieve seven per cent growth rate by 2020.
The Minister of Budget and National Planning, Udo Udoma, disclosed this to State House correspondents at the end of a weekly meeting of the council presided over by the Acting President, Yemi Osinbajo, at the Presidential Villa, Abuja.
Udoma said the Federal Government would target 3.5 per cent growth rate in 2018; 4.5 per cent in 2019; and seven per cent in 2020.
He said, “The council approved the 2018-2020 Medium Term Expenditure Framework Fiscal Strategy Paper. As you know, we have been having extensive consultations in the last few weeks with the state governors, members of the public and the leadership of the National Assembly about the expenditure framework.
“The highlight of it is that we are committed to achieving seven per cent growth rate by 2020 in accordance with the Economic Recovery and Growth Plan. Indeed, the MTEFFSP is on plan.
“In terms of the trajectory of getting to the seven per cent, we have approved a slightly different trajectory in the sense that our target will be 3.5 per cent growth rate in 2018; 4.5 per cent growth rate in 2019; and in 2020, it will be seven per cent growth rate.
“In terms of crude oil projection for next year, it is 2.3 million barrels per day and we expect it to be broken down to 1.8 million barrels per day with regular crude and 500,000 barrels per day in terms of condensate. The price we have projected is $45 per barrel.
“We are also committed to raising additional revenue so as to reduce the debt service-to-revenue ratio. That is part of the policy of this government to make sure that our borrowing is reduced and to make sure that we keep a reasonable debt service ratio, which will of course help to reduce interest rate.”
He said the exchange rate remained N305 as indicated by the Central Bank of Nigeria.
On the crude oil target, the minister said the Nigerian National Petroleum Corporation had assured the government that the country had capacity more than 2.3 million bpd.
But he said, “We have a lot of constraints. Some of the constraints have to do with cash call investment.
“We are now exiting from cash calls and with that exiting, those investment constraints are no longer there and consequently, we can’t fully produce much more than 2.3 million barrels per day.
“Know that part of that production is condensate — regular crude which is within the OPEC quota and the condensate, which is outside the quota. All that goes to fund the quota,” he said.
The Minister of Communications, Adebayo Shittu, said the council approved the National Information Communication Technology Infrastructure Backbone Project, popularly called NIT2 and domiciled within the Galaxy Backbone Limited.
According to him, it is a Federal Government-owned agency, which engages in service-wide connectivity of all government offices across the country.
The minister said, “There has been NIT1 project, which is about 80 per cent complete. Essentially, it covers most of the southern states and has a data centre project.
“The NIT2 is a concluding component of it to ensure that the entire country is fully covered by fibre optic connectivity in the whole of the country. One is happy that the China Exim Bank graciously supported Nigeria.
“They funded phase one and they are funding this phase two. By today’s approval, the Ministry of Finance would enter negotiations for the full implementation of the funding with us.
“The funding will cost $328m, approximately N100bn. When concluded, it will not only cover the entire MDAs, it will be enough for commercialisation to the private sector, particularly the GSM companies and other ICT industries. So, we know Nigeria will be making a lot of money from this facility when completed.”
…to refinance $3bn T-bills with dollar debt
the Federal Government plans to refinance $3bn worth of naira-denominated short-term Treasury bills with dollar borrowing of up to three years’ maturity.
This, it said, was meant to lower costs and improve its debt position as the economy recovers from a recession.
The Finance Minister, Mrs. Kemi Adeosun, said this on Wednesday, adding that the government was aiming to borrow less in naira and more in foreign currency (dollar).
She said the Federal Executive Council had approved parts of efforts by her ministry to restructure the nation’s debt portfolio.
She said an approval was given in June to restructure the country’s debt and borrow less in naira and more in dollars because it was cheaper.
The minister said the government could borrow at a cost of seven per cent overseas, roughly half the interest rate it was currently paying locally.
Dollars have been in short supply in the country since the price of crude oil, the main source of hard currency, plunged in mid-2014, triggering a currency crisis, an exodus of foreign investors and its first recession in 25 years.
The government expects the economy to recover this year and grow by 2.2 per cent. The International Monetary Fund sees just 0.8 per cent growth.
The minister said, “We got approval to refinance Treasury bills. As the Treasury bills mature, we will be refinancing them into dollars. $3bn worth of Treasury bills will be refinanced into dollars.
“So, as the naira Treasury bills mature, we will be issuing dollar instruments. We are not increasing our borrowing, we are simply restructuring. Instead of borrowing naira, we are borrowing dollars.
“The advantages are two: one is cost reduction. The average rate at which we borrow internationally is at seven per cent; whereas on our Treasury bills, we are paying between 13 per cent and 18.5 per cent. We are almost halving the cost of borrowing and it is to try and reduce pressure on debt service.
“As you know, our debt service is very high and one of the ways to try and do that is to refinance.
“The second thing is that we will be spending the maturity profile of the debt. All our Treasury bill mature maximum of 364 days. We will be taking that borrowing out for up to three years in the expectation that as the economy recovers and grows, we will be in a better position to repay instead of just rolling over the debt, just as we are doing at the moment.
“So, by reducing government’s borrowing by $3bn, we will be creating more room for banks to lend to the private sector and hopefully that will also create some downward pressure on interest rate, which we all agree needs to come down.”
The minister said the government was aiming to restructure its debt portfolio into longer-term maturities by borrowing more offshore and less at home to lower cost and support private sector access to credit to boost the economy.
She said the impact on the economy would be positive because $3bn would be coming into Nigeria’s foreign reserves.
“It actually increases our foreign reserves. If you look at our debt profile, 80 per cent is in naira and that is actually challenging the economy because government is borrowing heavily. There is no room for the private sector to get loans from the banks and there is no incentive for the banks to lend to the private sector.
“One of the things we need to do to create jobs and get the economy moving is for private sector lending to recommence,” she said.
The minister added, “This $3bn is approximately N900bn. We will not take from the domestic market to create room for private sector to go in. It will commence when the National Assembly resumes. We will need the resolution to be able to do this. As soon as that is done, we have already negotiated with the various lenders and they are ready to do this.”
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