The Federal Government has concluded plans to borrow $7.9bn (about N1.89tn) for the funding of pipeline projects in the country.

In two separate letters to the Senate and the House of Representatives on Tuesday, President Goodluck Jonathan said the borrowing would cover pipeline projects captured in the 2012 to 2014 External Borrowing Plan.

According to him, the development will see the government borrowing a total of$2.64bn (N396bn) annually.

“The pipeline projects are at various stages of finalisation. Therefore, I present herewith a total external pipeline borrowing in the amount of $7,905,690,000 or $2.64bn a year, being the cumulative facilities offered by the World Bank, African Development Bank, Islamic Development Bank, Exim Bank of China and Indian lines of credit,” the President explained.

Jonathan noted that some projects were embarked upon under the plan to put the economy back on track through growth and employment activities in the spirit of the transformation agenda.

“In that regard, a number of projects have been designed to create employment opportunities with a view to growing the economy,” he said.

The President urged the National Assembly to note “that the objectives of the projects conform to the transformation agenda of our administration and cut across various sectors of the economy.”

“The initiatives are meant to put the economy on track through growth and employment,” he said.

He also urged the National Assembly to approve the list of pipeline projects for inclusion in the Medium Term (2012-2014) External Borrowing Plan.

Should the National Assembly give the go ahead for the Federal Government to obtain the loan, the move will balloon the country’s foreign debt to $11.5bn.

The Federal Government currently owes $3.5bn made up of $2.9bn multilateral loans and $597.65m from other commercial sources.

The Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, had not hidden her preference for foreign loans over domestic loans.

Although she had championed the exit of the country from the Paris Club of Creditors during her first tenure as Minister of Finance, she had in recent times insisted that the nation’s rising domestic debt profile was not healthy for the economy.

As Managing Director of the World Bank, Okonjo-Iweala had criticised Nigeria’s debt structure on the grounds that the Federal Government was crowding out private sector borrowers from the debt market.

She had reasoned that the government could do with more foreign sources than domestic debt.

As at December 31, 2011, the domestic debt profile stood at N5.62tn, made up of N353.73bn in Treasury Bonds; Nigerian Treasury Bills, N1.73tn; and FGN bonds, N3.54tn.

The position of Okonjo-Iweala on domestic debts runs contrary to that of the Director-General, Debt Management Office, Dr. Abraham Nwankwo.

He had explained that the nation’s growing domestic debt profile was necessary to deepen the market as well as provide a vital source of funding for government budget deficits.

He had said, “The DMO reintroduced the issuance of sovereign bonds in 2003 but started regular bond issuance in 2005 based on a programmed monthly issuance calendar.

“With external borrowing limited to concession windows, borrowing from the domestic market became the main source of raising capital by the Federal Government for funding its activities.”

“The policy shift towards the development of the domestic market was anchored on the desire to not only finance government budget deficits, but also provide much needed platform for raising long term capital for funding public and private sector projects, insulate the domestic economy from external contagion, develop the domestic capital market and provide a benchmark for pricing other financial instruments in the system in line with global best practices,” he added.

Source: Punch