Dr. Zainab Ahmed, Minister of Finance, Budget and National Planning, on Friday dispelled the report that the Federal Government was planning to borrow N2 trillion pension funds for infrastructure development.
Ahmed stated this in Lagos at the Udo Udoma & Belo-Osagie second private equity summit, with the theme: “Drivers, Disruptors and Unlocking Value.”
She said government was not borrowing the fund for infrastructure development.
Ahmed said that the National Economic Council set up a committee of itself to explore the possibility of being able to encourage the pension fund managers to invest in infrastructure development.
She said: “It’s not that government is borrowing the pension fund.
“So, what we agreed now is to design a product that pension fund managers will find attractive enough to invest in, that will give them free safe returns.
“Right now, the regulator, PENCOM, actually allows pension funds managers to invest up to 20 per cent of their money in infrastructure.”
According to Ahmed, investment in infrastructure was not moving because it was easier for them to invest in Treasury Bills and Federal Government bonds.
She said with returns on TBs not good, they were looking for long-term instrument they could invest in.
Ahmed said that now, pension funds managers don’t have an opportunity to invest in Open Market Operation anymore.
“We are actually working to design products which they can uptake and we are also considering, in addition to regulation, whether we should amend the Act to allow them do other things,” she stated.
On government borrowings, she explained that government was working very hard to reduce domestic borrowing.
She said: “In 2015, the total government stock that we had was 80 per cent domestic and 20 per cent foreign.
“But we are gradually changing that; the debt management strategy is to move the ratio to 60 per cent domestic and 40 per cent external and now it’s 35 per cent external borrowing.
“This is to give room for private sector to borrow and to reduce cost of debt servicing.”
Speaking on Value Added Tax increment, Ahmed, who admitted that it would contribute to inflation rise, said it would moderate over time.
“When you increase any form of tax, it leads to inflation, but it’s a temporary thing; after some months it will moderate,” the minister said.
She said that government would continue to support the development of SMEs for economic growth and development.
The minister also said the Finance Act would be a regular feature that would accompany the budget going forward.
Ahmed said the next Finance Bill would be more consultative for more input.