LERE OJEDOKUN, Abuja

It said the measure is part of efforts to achieve macro-economic stability and mop up excess liquidity.

The bond instrument is also being targeted at easing burden of N1.3 trillion domestic debt, being serviced with N185 billion annually.

Finance Minister, Dr. Ngozi Okonjo-Iweala, who announced the approval by Federal Executive Council (FEC) of the plan, said government was returning to the bond market.

According to her, yesterday’s step was a follow-up to last year’s presenetation by the Economic Management Team (EMT) while stating that the focus would be mainly on restructuring domestic bonds.

She noted that the bonds would be introduced on seven monthly instalments of N20 billion each, so as not to overstretch the market.

Dr. Okonjo-Iweala also explained that about 80 per cent of the bonds have short tenor of between three and six months which would be extended to three years.

"That will have a couple of effects. One is that with longer maturity, it will ease the burden and lower the cost of domestic debt servicing. Even as we are focusing on trying to tackle the issue of our external debts, we must not forget that we also have internal debts that need to be restructured," she said.

The minister disclosed that about N185 billion annually was being spent on domestic debts servicing as against N183 billion used on the $38 billion foreign debts.

Apart from using anticipated proceeds from the bonds to restructure existing bonds and lengthen their maturity, she noted that the instrument could impact on macro-economy stability considerably.

On government’s financing of projects through "ways and means," obtained from the Cenetral Bank of Nigeria (CBN), she said government was doing everything possible to do away with this arrangement.

From 10 per cent access rate last year, the minister said borrowing was five per cent in the current year though the law allowed up to 12 per cent.

She said that the reduction in "ways and means" last year led to the loss of N7 billion by the apex bank, just as she disclosed that the practice of rolling the borrowing over as debt has been stopped.

Federal Capital Territory (FCT) Minister, Mallam Nasir el-Rufai, who also spoke, added that there were many dynamics in the capital market to ensure success of the bonds when floated.

He said the accumulation of billions of naira from the contributory pension scheme was another window of investment to help the bonds get needed capital outlay.The minister also disclosed that FEC approved the award of contract, valued at N14.3 billion fror the construction of water treatment plant at the capacity of 20,000 cubic litres per hour, for water supply to Abuja city.