The Minister of Finance, Mrs Kemi Adeosun, has expressed confidence that the Federal Government’s revenue and debt management strategy would mitigate the country’s debt service risk and fast-track development.
Adeosun, in a statement by her Special Adviser on Media, Mr Oluyinka Akintunde, on Thursday welcomed the advice of the International Monetary Fund in regards to the country’s decision to take more foreign loans.
She said that Nigeria’s further borrowings from foreign partners would help mobilise revenue, whilst reducing the nation’s debt burden by lengthening the maturity profile.
She said that foreign borrowings would also increase foreign exchange reserves, reduce crowding-out of the private sector and create savings in debt service cost.
The minister said that a key element of the Federal Government’s economic reform strategy was the mobilisation of revenue to improve the ratio of debt service to revenue.
She said that this was being undertaken through a number of initiatives including the plugging of leakages and the deployment of technology in revenue management.
She, specifically, cited the example of the Health Pay, a pilot cashless revenue project in the health sector which had recorded increase in revenue.
She said that the ongoing Voluntary Assets and Income Declaration Scheme (VAIDS) was equally expected to impact positively on the level of tax collections.
“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,” she said.
Adeosun said that Federal Government was refinancing its inherited debt portfolio and this would lead to significant benefits, particularly a reduction in costs of funds.
“The proposed refinancing of three billion dollars worth of short terms Treasury Bills into longer tenured international debt is expected to save N91.65 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.
“It will also support the aspirations of the monetary authorities to bring down interest rates,” She said.
The Government, according to Adeosun, does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plans (ERGP) would strengthen the naira.