Abuja (Sundiata Post) — The Federal Executive Council (FEC), presided over by President Muhammadu Buhari, on Wednesday, approved a loan of $1.3 billion facility for the takeoff of the Development Bank of Nigeria (DBN).
The Minister of Finance, Kemi Adeosun, who briefed State House correspondents at the end of the meeting, said that the loan has repayment period of 20 to 21 years, and will allow the development bank take off fully.
Nigeria’s foreign debt increased to $11406.28 million in the fourth quarter of 2016 from $11261.89 million in the third quarter of 2016.
The money, according to the Minister, will allow the DBN to lend to Small and Medium Enterprises (SMEs) for a longer period as they have the capacity to employ more than the big corporations.
Adeosun, who briefed alongside the Minister of Budget and National
Planning, Udoma Udo Udoma, and the Minister of State for Health, Osagie Ehanire, said the facilities were coming from the World Bank, African Development Bank, and the KfW Development Bank.
“Council gave the approval for credit facilities totaling $1.3 billion to support the Development Bank of Nigeria. As you know the Development Bank of Nigeria recently received its license and is been funded by some long term loans from some of our development partners.
“So, the World Bank had given us $500 million repayable over 21 years and all of this is at a concessional rate. The African Development Bank are giving us $450 million and KfW Development Bank are giving us $200 million and the French Development Agency are giving us $130 million,” she said.
She explained that two main requirements are needed to access the money, “this is the legal opinion by the Attorney General of the Federation and the other is the National Assembly approval.
“Before it goes to the National Assembly it needs to be approved by FEC and the FEC simply approved today that these loan requests should go to the National Assembly for approval so we can access this money and the Development Bank of Nigeria can take off fully as it is expected to transform Financing to our MSME sector.
“The Council enthusiastically approved these facilities which are long tenured meaning that the DBN will be able to lend to our MSEs over much longer periods and at much lower rates. So the impact on the SMEs will be quite considerable”.
On the country’s rising debt profile, Adeosun said Nigeria was still within its limits with a debt to GDP ratio of 13 percent when compared to other African countries.
“So, the question is what are the loans being used for and will it actually generate growth in the economy that will, therefore, generate additional taxes, which will be used to pay them back? The answer is yes because we are very specific on what we are borrowing for, we are borrowing for things that will generate wealth in the economy,” she said.
According to her, 45 percent of Nigeria’s economy is made up SMEs and only 10 percent of them can get loans at the moment.
“This loan will allow the SMEs now make much more money, if they have long term cheap funding and that will make them profitable and they will then pay more taxes, which will be used to service the loans. We have to borrow, we don’t have a choice.
“These are concessional loans with interest of two percent in some cases for 21 years. You can’t get that kind of money anywhere in the world and it is going directly to the people that need it,” Adeosun said.
Council also approved the procurement of project managers and verification consultants to bring 200,000 military officers onto the Integrated Payroll and Personnel Information System (IPPIS) platform.
Adeosun said the approval was given for three contracts totaling N550 million.
Adeosun added that the 200,000 officers will be drawn from the Army, Navy, and Air Force and after the verification, it will be determined, if they are more or less.
“We are hoping to bring in all the military by Third Quarter of 2017. We have assurances about the savings that we typically generate when we bring agencies on IPSS. Generally, when we bring agencies onto IPSS the payroll goes down efforts to sanitise our payroll and make sure that the money we are spending on salaries is very accurate. So bringing the military on boards is a big step in that area,” she said.
Earlier, Buhari launched the Economic Recovery and Growth Plan before the commencement of the Wednesday Council meeting.