Nigeria: FG Pays N669 Billion As Interest to Banks in One Year

BY GODDY EGENE

The federal government has said it paid N699 billion to banks as interest on borrowings last year alone.

The Minister of State for Finance, Dr. Yerima Ngama, disclosed this at a two-day round table on infrastructure organised by the Securities and Exchange Commission (SEC) in Lagos.

Ngama noted the interest payment was struggling with capital expenditure, hence government's efforts to reduce bank's borrowings and look for alternative ways of funding long-term projects going forward. He said while there were regular budget and other development funds, option of the capital market would also be exploited in very big way.

Ngama said the federal government planned to spend about N25 trillion under its transformation agenda 2011 to 2015. Out of this amount, 56.82 per cent (about N14.59 trillion) would come from the public while 43.18 per cent (N11.1 trillion). "We examined the various plans and what the infrastructure needs are. We then look at the various sources of funding that we need. Apart from the regular budget, we have other sources coming from excess crude and special funds set aside for developmental purposes. Today we are looking at how the capital market can be used to fund infrastructure development," he said.

Speaking on the infrastructure needs of the country, the Director-General of the Securities and Exchange Commission (SEC), Ms. Arumna Oteh, said going by the African Development Bank's Infrastructure Action Plan (IAP) for Nigeria, the country needed $35 billion in infrastructure equivalent to meet the $350 billion estimates in the next 10 years. According to her, existing sources could not cover half of this requirement.

He stressed that while low interest rates were currently available from developed markets, Nigeria must be careful not to overly depend on foreign loans to guard against exposure to foreign exchange risk especially given that revenues from infrastructure are predominantly in local currency.

She therefore suggested the Nigerian capital market as one the ways out. "Challenges posed by traditional funding sources make capital markets increasingly the preferred way to finance infrastructure in Nigeria. We have seen this preference in the number of state governments that raised monies for infrastructure in the domestic bond market in recent years," she said.

She noted the federal government had been an active participant in both the domestic and international bond markets. "FGN bonds dominate the bond market accounting for over N4 trillion of the market capitalisation of about N5.64 trillion while the addition of Nigeria's sovereign bonds to the JP Morgan Government Bond Index - Emerging Markets (GBI-EM) and Barclay's Bank Emerging Markets - Local Currency Index (EM-LCI) has made our sovereign bonds more attractive to global investors," she said.

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