Nigeria borrows 500 million Euros to finance Industrialisation projects, SMEs

Finance minister, Zainab Ahmed. [PHOTO CREDIT: Daily Trust]
Finance minister, Zainab Ahmed. [PHOTO CREDIT: Daily Trust]

The Executive Council of the Federation (FEC) on Wednesday approved the issuance of a 500 million Euro Sovereign Guarantee (about N153.5 billion) from the Credit Suisse AG London Branch as collateral for a loan.

The loan, 500 million Euro, was sourced from a ‘syndicate of international lenders’ to finance major industrialization projects, an official said. The loan was issued to Nigeria’s Bank of Industry.

The loan will also finance the activities of micro, small and medium enterprises value chains in Nigeria for up to five years, the Minister of State Budget and National Planning, Clement Agba, told journalists.

Mr Agba briefed State House correspondents at the end of the FEC meeting presided by President Muhammadu Buhari on Wednesday.

He said the main objective of the loan is to support industry, revitalize agro-industrial processing zones and facilitate the creation of new jobs.

He said the loan is to be disbursed to handlers of major industrialization projects and micro-small and medium enterprises value chains at single-digit rates

“The guarantor of the loan shall be the Federal Republic of Nigeria, to be executed through the Ministry of Finance Budget and National Planning,” Mr Agba said.

“We believe about 1.2 million jobs will be created through this facility; increase the income of farming communities and promote the inclusion of SMEs and smallholder producers in the industrial value chain.

“The loan will also help in the deployment of transportation infrastructure to connect farming communities to processors and market,” he said.

To mitigate the foreign exchange risks often associated with such facilities, the minister said the loan will be swapped to Naira by the Central Bank of Nigeria and made available to Nigerian enterprises in local currency.

Burgeoning Debt

The new loan will further raise concerns among Nigerians about the country’s debt profile.

Last October, following the presentation of the 2020 proposed budget by President Muhammadu Buhari, the Minister of Finance, Budget and National Planning, Zainab Ahmed, said there were plans to borrow an additional N1.92 trillion next year.

The new borrowing plan, which the minister said will involve N745 billion from domestic lenders, and about N850 billion from foreign borrowing, would push Nigeria’s total public debt portfolio to N25.7 trillion.

Nigeria will also be spending about a quarter of its 2020 budget to service its debt.

Many Nigerians, including the presidential candidate of the Peoples Democratic Party (PDP) in February’s elections, Atiku Abubakar, have described the appetite of the present administration for more loans as unsustainable.

Contribution to Power

Also, the FEC approved the release of $2 million (about N613.9 million) as Nigeria’s contribution to the West Africa Power Pool.

The Minister for Power, Saleh Mamman, said the ministry expected President Buhari to approve the memo sent to him seeking the ratification for the release of the fund.

On his part, the Attorney General of the Federation and Minister of Justice, Abubakar Malami, disclosed that the FEC approved the reforms for the justice sector.

“It is a blueprint that set out a shared vision, objectives and interventions for the reform of the justice sector to engender fair, efficient and transparent administration of justice.

“The intention and design were to have a justice sector reform package that will turn things for the better as far as the administration of justice is concerned.

“It will turn things around relating to justice. It turns things around in relating to speedy administration of justice and turns things around for the purpose of ensuring (that) at the end of the day, that we’ll have a consensus approach to the administration of justice,” Mr Malami said.

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