FG seeking ‘cheapest possible’ loan –Adeosun

Though Eurobond market still an option, FG now considering Chinese, Japanese bond markets

Improving electricity supplies, road and rail networks first step to diversifying the economy

World Bank has approved FG’s framework to boost tax collection, improve spending oversight

The Minister of Finance, Mrs Kemi Adeosun has said that she is widening the search for the “cheapest possible money” to finance infrastructure projects and plug a N2.2 trillion budget deficit Adeosun stated this in an interview with the Financial Times and Reuters conducted on Saturday but published on the website of the former on Sunday. The Federal government is embarking on a borrowing spree to pay for infrastructure projects its believes are key to reviving the economy which has been badly hit by the collapse in oil prices. sun said she is now considering tapping the Chinese and Japanese bond markets.

The Minister argued that Nigeria cannot rely on a rebound in oil prices and must use this difficult time to diversify the economy, adding that successive Nigerian governments have talked about this but failed to act. Improving electricity supplies, road and rail networks is the first step, she said, arguing that agriculture and manufacturing will not take off before infrastructure is built. To do this, Nigeria will run a budget deficit for the next two to three years, she said, and will require a consistent stream of “bulk money” to ensure funding does not dry up and halt work. Ms Adeosun wants to borrow 1.8tn naira ($9bn) of the record 2.2tn naira ($11bn) deficit from international and local markets. She has also begun talks with the World Bank and the African Development Bank over $3.5bn in loans. Those efforts have yet to yield the funds and there has been no roadshow.

In an interview on Saturday, Ms Adeosun said that although the Eurobond market was still an option, the Chinese and Japanese markets were looking cheaper and more appealing. “We were looking, originally, at doing about a billion dollars on the Eurobond market so we may split that between the Renminbi and the Eurobond,” she said. The delayed passage of the budget — approved by parliament last month — had slowed the process but Nigeria was still on track to be in the market by the third quarter, she added. A stickier issue may be the budget support loans the minister hopes to receive from multilateral lenders to plug the rest of the deficit. The minister says the World Bank has approved the government’s “policy framework” aimed at boosting tax collection and improving oversight of government spending.

But it remains unclear whether the exchange rate policy will get in the way. The International Monetary Fund has made plain its concerns and said in its recent annual review that restrictions had “adversely impacted economic activity”. It also questioned the government’s commitment to containing inflation, which jumped to 9.6 per cent in January, up from 7.9 per cent in December. The minister said there was no dispute with the IMF and stressed that despite not yet locking down borrowing requirements, “we’re not desperate, there are options”.

The projected deficit figure requires Nigeria to substantially increase non-oil revenues this year to account for the shortfall caused by the crude price crash. Ms Adeosun says this is possible by implementing basic measures that should have been in place for years. Ministry payrolls are being cleaned up and ghost workers removed. Government agencies are being forced to account for their earnings and expenditures.

She also has a back-up plan if she is unable to raise sufficient non-oil revenues: in a pinch, the government would withhold up to $5bn in “cash calls” budgeted this year to finance its share of costs in joint ventures with international oil companies. This would force the oil majors to make up some of the difference by providing bigger loans to the staterun NNPC — a move that would likely frustrate the industry and hurt output. The NNPC already owes at least $4bn to the majors and analysts have warned that unless funding issues are resolved the country’s 2.1m bpd oil output will drop.