As tongues wag over the avalanche of heavy offshore loans heaped on the country, the Minister of Finance, Mrs. Kemi Adeosun, yesterday said there was no cause for alarm as the Federal Government’s revenue and debt management strategy would mitigate its debt service risk to fast-track development.
The Minister, who welcomed the advice of Nigeria’s international development partners, including the International Monetary Fund (IMF), said the strategy would achieve a number of objectives that include: mobilising revenue whilst reducing the debt burden by lengthening the maturity profile, increasing foreign exchange reserves, reducing crowding-out of the private sector, and creating savings in debt service cost.
In addition, the Minister noted that the Federal Government was refinancing its inherited debt portfolio, adding that it will lead to significant benefits, particularly a reduction in costs of funds.
“The proposed refinancing of US$3 billion worth of short terms Treasury Bills into longer tenured international debt is expected to save ₦91.65 billion per annum.
“Other benefits of our revenue and debt management strategy include: improvement in foreign reserves as well as reduced domestic debt demand, which will reduce crowding-out of the private sector and support the aspirations of the monetary authorities to bring down interest rates,” the Minister added.
Adeosun stated that a key element of the economic reform strategy was the mobilisation of revenue to improve the debt service to revenue ratio.
This, she noted, was being undertaken through a number of initiatives including, the plugging of leakages and the deployment of technology revenue management.
She specifically cited the example of the Health Pay, a pilot cashless revenue project in the health sector, which recorded material increases in revenue.
She also mentioned the ongoing Voluntary Assets and Income Declaration Scheme (VAIDS), which is expected to impact positively the level of tax collections.
Adeosun said: “The difference in our economic strategy is that we are changing the mix of revenue sources available to government from the traditional oil or debt to a combination of oil, debt and domestic revenue.
“This is a long term strategic reform which is critical to our future economic growth and in the short term will enable our debt service to revenue ratio to improve.”
The government, according to her, does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plans (ERGP) reforms, over the medium term, is such that the naira is expected to strengthen.