The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has rejected calls for the Federal Government to disclose how it intends to spend proceeds from its $5billion financing facility with First Abu Dhabi Bank.
The Federal Government recently drew down about $1.5billion, the first tranche of the $5billion Total Return Swap facility arranged with First Abu Dhabi Bank, despite reservations expressed by the International Monetary Fund and Fitch Ratings over the risks associated with such financing arrangements.
Speaking at a media briefing in Abuja on Wednesday, Oyedele said the transaction had been subjected to needless scrutiny, insisting it was duly approved by the National Assembly and structured to help government refinance costlier debt.
Asked whether details of the First Abu Dhabi Bank transaction would be made public, the minister said government would continue to disclose how it spends public funds generally, but questioned why this particular facility was being singled out.
“We will not publish how we are spending it. We will publish how we spend government money. There’s nothing special about that loan,” he said.
He added: “Nobody has asked us whether we’re going to publish the money we took from the World Bank, whether we publish the one from Eurobond, whether we publish the one from Sukuk. Why is this one special?”
Oyedele Defends Due Process
The minister dismissed insinuations that the transaction lacked due process, stressing that it was presented to the National Assembly.
“The loan was approved not only by FEC, it was taken to National Assembly, because what some people are doing is they are comparing with other countries where they did it under the table. What else can be more public than what you gave to the National Assembly?” he said.
Oyedele explained that government was drawing down the funds in phases to avoid unnecessary costs.
“We’re accessing it in phases. You don’t want to take all the money at once because if you don’t spend it at once, you incur cost on the extra amount you’ve taken,” he said.
Flexible Rate Advantage
The minister noted that the First Abu Dhabi Bank facility differs from Nigeria’s traditional fixed-rate borrowing, as it operates on a flexible interest rate structure.
“You need to understand the transaction. There’s always the textbook analysis, and there’s the real life of what you’re doing. We’re used to raising bonds on fixed interest rate terms. Our Eurobond, for example, was raised when the coupon was in double digits. Today, our yield is down to around seven, 7.5 per cent,” he said.
He explained that Nigeria has been unable to benefit from the drop in yields on its existing fixed-rate debt, unlike with the new facility.
“This First Abu Dhabi Bank transaction is flexible rate. It means if rates go up, we pay more. If rates come down, we benefit more. There’s nothing that says we must always do one thing, and the all-in rate for this transaction is lower than our existing portfolio,” he said.
Oyedele maintained that the overriding objective of the facility was to refinance more expensive debt and cut government’s borrowing costs.
“So the objective is to use it to refinance expensive debt so you can save money,” he said.
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