Nigeria’s government expects the naira currency to strengthen and does not see a significant risk of devaluation in the medium term, Finance Minister Kemi Adeosun said on Thursday.
The naira has been stable across its multiple exchange rates, while the central bank continues to intervene with dollar sales on the official market since lifting currency controls for investors.
The currency has been hovering at around 360 naira per U.S. dollar for investors, the same level as the parallel market. On the official market, the naira has been quoted at around 305 per dollar for more than three months.
Adeosun also defended the government’s plan to borrow more in dollars to refinance a portfolio of treasury bills and help plug holes in its 2017 budget.
Nigeria expects a shortfall of $7.5 billion for its 2017 budget, which it plans to raise in foreign loans from the World Bank and from offshore markets.
It intends to issue a $2.5 billion Eurobond this year and is also considering offshore loans of $3 billion to repay part of a local treasury bill holding worth 2.7 trillion naira.
“The government … does not see a significant devaluation risk as the implementation of … reforms, over the medium term, is such that the naira is expected to strengthen,” Adeosun said in a statement.
The International Monetary Fund has voiced concerns about rising debt service risk. Adeosun said its debt strategy would reduce Nigeria’s debt burden, boost foreign reserves and create savings in debt costs.
Adeosun said the treasury bill refinancing would save 91.65 billion naira per annum in debt servicing costs while the Eurobond issue would save 76.37 billion naira annually when compared to the cost of borrowing at home.
The central bank devalued the naira for retail users in February after it lifted a temporary currency peg last year, but to protect its foreign reserves it introduced a convoluted exchange rate system that sees different buyers paying various rates for dollars.