Abu Dhabi $1.5bn Drawdown Will Help Reduce Borrowing Cost – Oyedele

The minister of finance and coordinating minister of the economy, Taiwo Oyedele, has said Nigeria’s decision to draw funds from its $5 billion financing arrangement with First Abu Dhabi Bank (FAB) in phases is aimed at reducing the country’s borrowing costs and improving debt management efficiency.

Speaking with journalists after the Federal Executive Council (FEC) meeting in Abuja yesterday, Oyedele confirmed that the federal government had accessed the first $1.5 billion under the financing arrangement, explaining that the facility was deliberately structured to allow drawdowns only when funds are required.

According to him, taking the facility in tranches would prevent the government from paying interest on funds that have not yet been deployed.

“So, the loan is meant to be a draw down in tranches, and one of the advantages of that is, if you, if you need $5 billion and you take everything at once, you start paying interest, even though you’re not spending all of it now. So, this has been structured in a way that makes us even more efficient in the cost of borrowing by taking what we need part time.”

Oyedele also said the financing arrangement had received legislative approval and was intended to refinance expensive debt, finance infrastructure projects and support budget implementation.

“The approval for that loan went to the National Assembly, so everybody is aware of it. It’s for refinancing of expensive debts, financing of infrastructure, as well as budgets. So, we don’t want to start making press releases each time we do a draw down is not different from any other loan,” he said.

Oyedele’s comment is the first official confirmation that Nigeria has drawn the initial $1.5 billion from the $5 billion financing package with First Abu Dhabi Bank, following reports last week that the government had begun accessing the facility through a Total Return Swap arrangement.