The Federal Executive Council at it's meeting on Wednesday approved the signing of a loan agreement with Indian Import Export Bank in the sum of $100 million, to boost power supply in three states.
The loan after first being taken by the Fereral Government is expected to be lent to three states which include Cross River, Enugu and Kaduna.
Briefing Journalist after the weekly meeting, which lasted for just about one hour and presided over by Vice President Namadi Sambo, the minister of state for finance, Yerima Ngama, said the facility is mostly for transmission lines as well as other accessories to develop the country's industrial area.
He also explained that the credit facility is different from the previous loans that led to the pirating of huge foreign debt.
"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.
"$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.
The facility, which is coming at a concessionary rate was taken at 2% interest rate and will be repaid over a ten year period with three years moratorium, but there will be a commitment charge of 0.5% of undrawn balance and 0.5% for service charge.
The minister also noted that the facility has 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.
Fielding questions from journalists, 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.
He also noted that domestic debts are of greater concern to government with government borrowing at as high as 19 percent adding that Government is now encouraging concessionary foreign debt.
Explaining 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".
He added that 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.
The minister further disclosed that 70 percent of registered companies in Nigeria do not pay tax.
"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" he said.