Nigeria’s decision to collect government payments in one bank account will help limit state borrowing, reduce payment delays and curb corruption, its finance minister said on Monday.
Last year, President Muhammadu Buhari ordered the merger of state accounts into one “single treasury account” at the central bank to reduce graft and a practice where the government borrowed back its own funds from lenders at an interest.
Nigerian government ministries and other state bodies operated more than 10,000 bank accounts with commercial lenders in the past, an official said.
Finance Minister Kemi Adeosun said the government had so far channelled over 2.2 trillion naira into its treasury account.
“(The) Treasury single account has eliminated opportunities for…corrupt practices. We believe that this will reduce payment delays to contractors, minimise late-payment penalties and improve project completion times,” Adeosun said.
“This… will reduce the amount to be borrowed,” she said in a statement, without giving a figure.
Africa’s biggest economy has held exploratory talks with the World Bank and looked at borrowing from the African and China Exim Bank to help fund a projected budget deficit of 3.3 trillion naira in 2016.
With the drop in the price of oil, Nigeria’s main export and the source of 95 percent of foreign earnings, government revenues have nose-dived while the naira has tumbled to record lows on the black market.
Buhari is hoping that the 2016 budget of 6.08 trillion naira this year, an increase of 1.68 trillion naira over last year, will Nigeria fend off its worst economic crisis in decades. But funding remains a challenge.
On Friday, Adeosun said the oil producer is seeking to tap financing at “concessionary rates” as low as 1.5 percent from international agencies before returning to the eurobond market.
Nigeria’s debt to GDP ratio averages a relatively low 14 percent. However, total debt has risen to 12.60 trillion naira ($65 billion) as of December 2015, from 11.2 trillion naira in 2014.($1 = 198 naira)