The Federal Executive Council, FEC, formally granted the approval at yesterday’s meeting presided over by President Muhammadu Buhari at the Presidential Villa, Abuja.
The Federal Government, yesterday, approved the request for three loans worth $1.3 billion for the newly established Development Bank of Nigeria, DBN, to kick off.
FEC also gave its nod for the registration of 200,000 personnel of the Nigerian military, cutting across the Army, Navy and Air Force into the Integrated Personnel Payroll Information System, IPPIS.
This, the council did by approving the award for the procurement of project managers and verification consultants for a total cost of N550 million to bring the personnel onto the IPSS platform, hoping to bring in all the military by third quarter of 2017.
IPPIS is one of the transformation agenda of the Federal Government, with the aim of creating a centralized database system for Nigerian Public Service with a single, accurate source of employee information that provides integration with other business application.
Minister of Finance, Mrs. Kemi Adeosun, made the disclosure while briefing State House correspondents at the end of FEC meeting.
Adeosun, who was in company of Minister of State for Health, Osagie Ehanire, and Senior Special Assistant to President Buhari on Media and Publicity, Mallam Garba Shehu, said the World Bank had made available for Nigeria the sum of $500 million repayable over 21 years.
She added African Development Bank was also giving the country $450million, while KfW Development Bank based in Frankfort, Germany, would lend Nigeria $200million. Similarly, she said French Development Agency had earmarked $130million for the country as well. According to her, the loans are at concessional rate.
Adeosun explained that it was necessary to give the approval and forward same to the National Assembly for ratification to enable the government access the loans, saying they would greatly assist in the drive to reposition the Small and Medium Scale Enterprises, SMEs. She said: “I have two memos approved by the FEC. The first was the approval of the award for the procurement of project managers and verification consultants to bring 200,000 of our military onto the IPSS platform. We are hoping to bring in all the military by Q3 of 2017.
“We have assurances about the savings that we’ll typically generate when we bring agencies on IPPIS. Generally, when we bring agencies onto IPPIS, the payroll goes down. Efforts to sanitize our payroll and make sure that the money we are spending on salaries is very accurate. So, bringing the military on board is a big step in that area.
“The other memo was an approval for credit facilities totalling $1.3billion to support the Development Bank of Nigeria. As you know, the Development Bank of Nigeria recently received its license and it’s being funded by some long term loans from some of our development partners.
“So, the World Bank has given us $500 million repayable over 21 years and all of this is at concessional rate. “The African Development Bank is giving us $450million and KfW Development Bank are giving us $200million and the French Development Agency are giving us $130million.
“To access this money, we are ready to disburse but there were two requirements that we need to make and one of them 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.”
Fielding questions from Journalists, the Finance Minister underscore the advantage of borrowing, saying Nigeria stood to benefit from it. She said: “Currently out debt to GDP ratio is just 13% while many African countries are 60 and in the West some we have 100 percent and above.
So the question is what are the loans being used for and will actually generate growth in the economy that will therefore aggregate 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.
“Take this loan today for instance, $1.3billion, 45% of Nigeria’s economy is SME and only 10% can get loans at the moment. It is either they don’t have loans and they are asked to go and bring one document and the other that they don’t have or the interest is so high. “In other countries like Brazil about 99% of the SMEs have bank loans. Majority of smaller businesses in Nigeria today are undercapitalized.
So they can 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 added that the IPPIS contract totalled N550 million. “
The total number for all are drawn from the Army, Navy, Air force and it is put at 200,000. So, it when we begin to verify that we will know whether they are more or less. “There are three contracts totaling N550million,” she said.
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