We Won’t Reveal How We’ll Spend It’ – Oyedele Speaks On $5bn Abu Dhabi Loan

The Federal Government recently accessed approximately $1.5 billion as the first tranche of the $5 billion Total Return Swap facility arranged with First Abu Dhabi Bank. The arrangement has, however, attracted concerns from the International Monetary Fund and Fitch Ratings over the risks associated with such financing structures.

Speaking at a media briefing in Abuja on Wednesday, Oyedele said the transaction had been subjected to unnecessary scrutiny.

According to the minister, the facility received approval from the National Assembly and was designed primarily to enable the government to refinance more expensive debt.

When asked whether the government would make public details of how the funds from the First Abu Dhabi Bank facility would be spent, Oyedele said public expenditure would be disclosed but questioned why the particular loan was being singled out.

He said, “We will not publish how we are spending it. We will publish how we spend government money. There’s nothing special about that loan.”

Oyedele added, “Nobody has asked us whether we’re going to publish the money we took from the World Bank, whether we publish the one from Eurobond, whether we publish the one from Sukuk. Why is this one special?”

The minister also dismissed claims that the financing arrangement was obtained without following due process, stressing that it had been presented to the National Assembly.

He said the facility was approved by the Federal Executive Council and subsequently taken to the National Assembly, arguing that the process was sufficiently transparent.

“The loan was approved not only by FEC, it was taken to National Assembly because what some people are doing is they comparing with other countries where they did it under the table.

“What else can be more public than what you gave to the National Assembly?” he asked.

Oyedele explained that the government was accessing the facility in phases to minimise additional costs rather than drawing down the entire amount at once.

He said, “We’re assessing it in phases. You don’t want to take all the money at once because if you don’t spend it at once, you incur cost on the extra amount you’ve taken.”

The minister further explained that the First Abu Dhabi Bank arrangement differs from Nigeria’s conventional fixed-rate borrowing because it operates on a flexible interest-rate structure.

He noted that Nigeria had traditionally relied on bonds issued at fixed interest rates, citing Eurobonds that were issued when coupon rates were in double digits.

According to Oyedele, Nigeria’s current yield on those bonds has fallen to around 7 to 7.5 per cent, but the country cannot automatically benefit from the lower market yield because the debt was issued at fixed rates.

He said the First Abu Dhabi Bank facility offers greater flexibility because the interest rate can move in either direction.

“This First Abu Dhabi Bank transaction is flexible rates. It means if rates go up, we pay more. If rates come down, we benefit more.

“There’s nothing that says we must always do one thing. And the all-in rate for this transaction is lower than our existing portfolio,” he said.

Oyedele maintained that the main purpose of the facility was to replace more expensive debt with cheaper financing and ultimately reduce the government’s borrowing costs.

“So the objective is to use it to refinance expensive debt so you can save money,” he said.