Nigeria’s external debt profile has continued to rise following President Muhammdu Buhari’s fresh requests from the national assembly to approve $6.183 billion (about N2. 3 trillion) foreign loan.
Before the latest requests, Nigeria’s total external debt stood at $33.348 billion, while total public debt stock as of December 30, 2021, which was released by the DMO in March 2021, stood at N32.915 trillion.
The money, if secured, will enable the federal government to finance the deficit of N5.602 trillion in the 2021 budget.
The president’s requests were contained in separate memos to the senate president, Mr. Ahmad Lawan and speaker of the house of representatives, Mr. Femi Gbajabiamila.
The two request letters, dated May 6, 2021, came a month after the senate and the house of representatives approved $1.5 billion and €995 million external borrowings for the federal government to finance various priority projects and to support states facing fiscal challenges.
Lawan read the letter addressed to him on the floor of the senate at plenary yesterday.
Buhari also asked the senate to give concurrent approval for donor fund projects under the 2018-2020 federal government external borrowing (rolling) plan of $36,837,281,256.00 plus Euro 910,000,000.00 and grant component of $10,000,000.00.
The president explained that the requests were in line with the provisions of Section 21(1) and 27(1) of the Debt Management Office (DMO) Establishment Act 2003.
Tagged ‘Request for the resolution of the national assembly for the implementation of the new external borrowing of N2.343 trillion (about $6.183 billion) in the 2021 Approved Act’ the president said he forwarded the memo to request for a resolution of the national assembly to raise the N2, 343,387,942,848.00 (about $6,183,081,643.40 at the budget exchange rate of $1.00/N379 provided as new external borrowing in the 2021 Appropriation Act, to part-finance the budget deficit of N5.602 trillion.
“The president of the senate may wish to recall that the 2021 Appropriation Act provides for N4,686,775,885,696.00 as new borrowings (Item No. 328) to part-finance the 2021 fiscal deficit, of which 50% or $2,343,387,942,848.00 (about $6,183,081,643.40 at the budget exchange rate of $1.00/N379) is specified as new external borrowing.
“The president of the senate may also wish to note that the allocation of N2.343 trillion to new external borrowing in the 2021 Appropriation Act is consistent with the Nigeria’s Debt Management Strategy, which seeks amongst other objectives, to moderate debt service costs by accessing relatively cheaper external funds, and to free-up space in the domestic market for other borrowers.”
On the government’s funding plan, the President said: “I wish to bring to the attention of the President of the Senate that the plan is to raise the sum of $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.
“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 USD3 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 five — 30 years; the outcome would, however, be determined when Nigeria approaches the market.
“The president of the senate may further wish. to note that not only is the ICM now open to issuers like Nigeria and Interest Rates lower than the levels in 2020, given the recent monetary policy stance, as well as, rising levels of inflation, the level of liquidity in the domestic market has decreased while domestic Interest Rates are beginning to rise.”
“Therefore, accessing the ICM will be relatively cheaper thereby moderating debt service cost, and it will also contribute to the level of External Reserves.”
On the utilisation of the loan, Buhari said: “The proceeds of the $6.183 billion (N2.343 trillion new external borrowing in the 2021 Appropriation Act) will be used to fund specific capital projects in the budget.
“These include projects from priority sectors of the economy, namely: Power, Transportation, Agriculture and Rural Development, Education, Health, Provision of Counterpart Funding for Multilateral and Bilateral projects, Defence and Water Resources.”
On summary of indicative terms and conditions, the President said: “With respect to the terms and conditions of the proposed external borrowings, the President of the Senate may wish to note that the multilateral and bilateral institutions operate on standard terms and conditions and these are outlined in appendix II.”
On the Eurobonds, Buhari said the final terms and conditions (interest rate and tenors) can only be determined at the point of issuance of the bonds in the ICM and will be subject to market conditions prevailing at that time.
“In the event that some or all of the $6,183,081,643.40 has to be raised through Eurobonds, the Federal Ministry of Finance, Budget and National Planning and the Debt Management Office, working with the Federal Government’s appointed transaction advisers, will ensure that Nigeria secures the best terms and conditions within the context of the market”, he said.
Buhari urged the Senate to note that “in line with the previsions of Sections 21 (1) and 27 (1) of the DMO Act, a specific Resolution of the NASS (National Assembly) is required for external borrowing as stated”.
“Accordingly, the President invited the Senate to consider and approve a resolution as requested.”
On concurrent approval for donor fund projects, Buhari said that the request is under the 2018-2020 Federal Government External Borrowing (Rolling) Plan, at a total sum of $36,837,281,256.00 plus Euro 910,000,000.00 and grant component of $10,000,000.00 to become
On the 2018 – 2020 Federal Government External Borrowing (Rolling) Plan donor-funded projects for consideration and concurrent approval of the Senate, the president said: “The projects listed under the 2018-2020 External Borrowing Plan are to be financed through sovereign loans from the World Bank, African Development Bank (AfDB), French Development Agency (AFD), Islamic Development Bank, China EXIMBank, China Development Bank, European Investment Bank, European ECA, KfW, IPEX, AFC, India EximBank and International Fund for Agricultural Development (IFAD) at $36,837,281,256 plus Euro 910,000,000 and grant component of $10,000,000.”
With The Nation report
