FG to Introduce Dollar-backed Treasury Bills

The federal government Wednesday approved the issuance of dollar-backed Treasury Bills which   maturity period will be between 91 and 364 days to two and three years correspondingly, a shift from naira denomination of treasury bills
Minister of Finance, Mrs. Kemi Adeosun, however said Tuesday that though the policy has been approved by the Federal Executive Council (FEC), it will still have to be approved by the National Assembly.
Adeosun explained that the extension of the treasury bill tenor from 91 and 364 days to two and three year period is expected to give government the time to repay the debt.
She also said that the policy will reduce borrowing to $3 billion and will also help banks to lend more to private investors at low interest rates.
She said, “We are not issuing dollar denominating Treasury bills (TB). No, we are not. What we are doing is that the naira Treasury bill, when it matures, we will then issue bonds in the capital market, international capital market. We are not issuing dollars’ TB at all – erratic dollar bonds.
“You will recall that when we went to the capital market about three times this year, our average cost of borrowing was longer than 7 per cent. But with Treasury bills, we are paying up to 18 per cent. So, what we are doing is simply substituting the maturing naira debt with cheaper dollar denominating debt. We are not dollarising the economy.
“In terms of the impact on naira, it’s going to be positive because it means that $3 billion will be coming into our foreign reserve. It will actually increase our foreign reserves.
“We are not issuing Treasury bills in dollars. Nigerian government doesn’t transact in dollars at all. We are not paying anybody in dollars. What we are simply doing is that as the Nigerian government treasury bills mature, we are now going to pay off by proceeds of dollar denominating bond, a three year-bond. Instead of the treasury bill of 91 to 364 days, we are taking short term money and we refer them to the Treasury bills because anytime we run out of cash to borrow with interest and we cannot pay back, we run to the capital market. It actually increases our debt.
“What we are saying is that in the long run because we are coming into recovery, we need a little bit more time to repay. Instead of saying we are paying back in 91 days, we say, ‘let’s be realistic, we need two to three years to pay off this money.’ So, we are taking dollar denominating long term bonds. It is cheaper than the naira loans and we refer them to the Treasury bill. We are not dollarising our economy in any way”.

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