Senate approves Buhari’s request for N2.3trn external loan

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The senate on Wednesday approved President Muhammadu Buhari’s request for the authorisation of $6.183 billion (N2.343 trillion) as external borrowing in the 2021 Appropriation Act.

The external borrowing is expected to be sourced through the Issuance of Eurobond in the International Capital Market.

The approval by the Senate on Wednesday was sequel to the consideration of a report by the Committee on Local and Foreign Debts.

Presenting the report, chairman of the committee, Mr. Clifford Ordia, said in considering the president’s request, the committee noted the serious concerns of Nigerians about the level of sustainability and servicing of Nigeria’s external borrowing.

“Due to the short fall in our annual revenues in relation to our need for rapid infrastructural and human capital development, we had to pass deficit budget every year requiring us to borrow to finance the deficit in our budget,” he said

Ordia explained that the new borrowing was calculated at Exchange rate of USD1/N379, and raised from multiple sources – multilateral and bilateral lenders through the issuance of Eurobonds in the International Capital Market.

He emphasized that the proceeds of the USD$6.183 would be used to fund various specific capital projects specifically from priority sectors of the economy namely; power, transportation, agriculture, and rural development, education, health, provision of counterpart funding for multilateral and bilateral projects, defense and water resources.

The ranking Senator disclosed that the final terms and conditions – the interest rate and tenors in the case of Eurobonds – can only be determined at the point of issuance of the Bonds in the International Capital Market and would be subject to market conditions prevailing at the time of issuance.

He added that the Primary listing of the Bond will be on the London Stock Exchange while the Secondary Listing will be on the Nigerians Stock Exchange and Financial Markets Dealers Quotations (FMDQ) Securities Exchange.

He observed that, “multilateral and bilateral institutions operate on standard terms and conditions and Nigeria secures the best terms and conditions within the context of the market.”

Accordingly, the senate while adopting the resolutions of the Committee on Local and Foreign Debt approved the issuance of $3 billion USD but not more than $6,183,081,643.40 Eurobond in the International Capital Market for the implementation of the new External Borrowing of N2,343,387,942,848, for the financing of part of the deficit authorized in the 2021 Appropriation Act.

It also approved that the amount authorized may be raised from multiple sources such as the International Capital Market and any other Multilateral or Bilateral sources as may be available.

In addition, the lawmakers directed the minister of finance, budget and national planning, Mrs. Zainab Ahmed; the director general of the debt management office Mrs. Patience Oniha; and the governor of the Central Bank of Nigeria, (CBN), Mr. Godwin Emefiele, to submit to the national assembly within 10 working days (excluding the day of close of trading), a letter containing the United States dollars amount so raised and received as a result of the approval together with the applicable exchange rate.

In his remarks, the senate president, Mr. Ahmad Lawan, stressed that the approved external borrowing is not a fresh loan by the president administration but a request captured in the 2021 Appropriation Act passed by the National Assembly last year.

He, however, tasked Committees of the National Assembly to carry out strict oversight on how the loans are applied to the implementation of the 2021 budget.

Lawan urged ministries, departments and agencies of government entrusted with the management of the funds to ensure prudent application to projects across the country.

“Our committees should be alert on how the funds that will be borrowed will be used.

“No frivolous expenditures should be entertained. I imagine that everybody in the trust of public funds…will be as prudent and economical as possible,” he added.

Recall that Buhari had in a request letter dated May 18, 2021 and read at senate plenary on June 2, 2021 asked the upper legislative chamber to approve N2.3 trillion external loan to fund the 2021 budget deficit

The request letter was subsequently referred to its committee on Local Debts and Foreign Loan for further legislative work.

The president had in the letter sought upper chamber’s approval of N2.3trn ($6.18bn) external borrowing to fund the 2021 budget deficit of N5.6trn.

He also indicated that the loan would enable the federal government to fund critical infrastructural projects in health, education.

With ThisDay report

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