By Kassim Omomia
President Muhammadu Buhari has written the House of Representatives seeking their approval to borrow another $6.183 billion (about N2.34 trillion)
He said the new external borrowing plan for 2021 would be used partly to finance the N5.602 trillion deficit in the budget.
The request by President Buhari was contained in a letter addressed to Speaker Femi Gbajabiamila, and read during the plenary of the House of Representatives on Tuesday.
He also requested the House approval of some donor-funded projects listed in the 2018-2020 external borrowing plan, to be financed through sovereign loans from the World Bank. African Development Bank (AfDB), French Development Agency (AFD), Islamic Development Bank, China EXIM Bank.
Other banks to finance the projects include China Development Bank, European Investment Bank, European ECA. KfW, IPEX, AFC, India EximBank, and international Fund for Agricultural Development (IFAD), all totalling $3,837 billion, and €910 million.
According to Mr President, the reason for the new borrowing plan is to raise the sum of USD 6.183 billion from a combination of sources; namely: multilateral and bilateral lenders, as well as from the International Capital Market (ICM) through the issuance of Eurobonds.
He explained that from recent trends in the ICM, it is now possible for Nigeria to raise funds in the ICM “and this explains why we are proposing that the New External Borrowing in the 2021 Appropriation Act, should include issuing Eurobonds in the ICM.”
” We estimate that Nigeria may be able to raise USD 3 billion or more, but not more than USD 6.183 billion (the amount provided in the 2021 Appropriation Act) in a combination of tenors between 5 and 30 years; the outcome would, however, be determined when Nigeria approaches the market.
“This request is in line with the provisions of Sections 21(1) and 27(1) of the Debt Management Office (Establishment, Etc.) Act, 2003 (DMO Act). Section 21(1) of the DMO states that ‘no external loan shall be approved or obtained by the Minister unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution’, while Section 27(1) states that ‘the National Assembly may by a resolution approve, from time to time, standard terms and conditions for the negotiation and acceptance of external loans and issuance of guarantees” he added.
Senate Alarmed Over Nigeria’s Rising Public Debt Stock, Projected To Hit N38.68tr December, 2021
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Citing certain economic factors, the president explained that “accessing the ICM will be relatively cheaper thereby moderating debt service cost, and it will also contribute to the level of External Reserves”.
Also on the donor-funded projects, he explained that “the projects and programmes in the Borrowing Plan were selected based on positive, technical and economic evaluations as well as the contribution they would make to the socio-economic development of the country including employment generation and poverty reduction as well as protection of the most vulnerable and very poor segments of the Nigerian society”.
