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FG secures $100m Indian loan for power projects in Enugu, Kaduna, Cross River

By The Citizen

The Federal Executive Council today approved a loan agreement with Indian Import Export Bank in the sum of $100 Million, to boost power supply in three states – Enugu, Kaduna and Cross River.

The Federal Government after securing the loan will thereafter lend same to the three states, according to the Minister of State for Finance, Yerima Ngama.

Ngama said the facility is coming at a concessionary rate put at two per cent interest rate and will be repaid over a 10 year period with three years moratorium, but there will be a commitment charge of 0.5 per cent of undrawn balance and 0.5 per cent for service charge.

“The Council meeting which last just about one hour and presided over by Vice President Namadi Sambo, said the facility is mostly for transmission lines and other critical power projects to develop the country’s industrial area.

“Compared to previous loans that led to the pirating of huge  foreign debt, this one was different.

“First, the facility will be taken by the Federal Government of $100 million and will be on lent to Cross Rivers state for the Calabar independent Power project and Enugu state government is going to get $40 Million for the electrification of 96 communities supply and commissioning of 33KVA  and  four 15KVA lines and the distribution of transformers and other accessories to the 96 communities in the three Senatorial zones of Enugu state.

“The $30 million will be on lent to the Kaduna state government and this will be used to augment the resources needed for the construction of the 70 Kilometers transmission line from the Gurara dam to Kaduna industrial area. It will also be used for the construction of 132/ 33KVA  substation  power supply to Kaduna industrial area and 50 communities in Kaduna state will also benefit from solar electricity project” he said.

Ngama disclosed that the facility has already been approved by both the National Assembly in the Medium Term borrowing plan and the respective State Houses of Assembly.

“We believe this facility will go a long way towards transforming our industrial areas as well other communities as part of Mr. President’s economic transformation agenda” he said.

Also shedding more information on Nigeria’s debt profile, the Minister said the preponderance of commercial credits led to high interest rates making Nigeria to pay over $40 billion for debt servicing, under the current regime, government is getting development loans also known as multi lateral and bilateral assistance.

Ngama said that domestic debts are of greater concern to government with government borrowing at the rate as high as 19 percent adding that Government is now encouraging concessionary foreign debt.

“The reason for higher recurrent expenditure, Ngama explained that Debt to GDP ratio is just slightly less than 20 percent, but these loans are geared towards development of infrastructural facilities. The N3.6 trillion bond was raised to fund the 52 percent salary increase 2010. Nigeria is also said to have the lowest tax and vat rates with over 70 per cent registered companies in Nigeria not paying tax.

“These are briefcase companies but making a lot of money. This is the only country where everybody can import anything. The only people who pay tax in Nigeria are those whose taxes are deducted at source”, the Minister said.