President Muhammadu Buhari has asked the Senate to approve $5.5billion external loan.
The loan is part of the 2016-2018 External Borrowing Plan of the Federal Government and is meant to finance capital projects in the 2017 budget and refinance maturing domestic debts.
In a letter read on the floor at Tuesday plenary by Senate President Bukola Saraki, the President, however, pointed out that the terms and conditions of the borrowings are unknown.
“With respect to the Terms and Conditions of the proposed External Borrowings the Senate may wish to note that being market based transactions, the terms and conditions of the borrowings can only be determined at the point of issuance of finalisation based on prevailing market conditions in the lCM,” the President in his letter dated October 4, 2017 and addressed to Senate President Bukola Saraki.
Breakdown of the loan indicated that while $2.5billion will be borrowed in the international capital market through Eurobonds for financing the deficit in the 2017 Appropriation Act, $3billion will be sourced externally for the refinancing of maturing domestic debt obligations.
“The Senate is requested to kindly approve the following external borrowings: Issuance of $2.5billion in International Capital Market through Eurobonds or a combination of Eurobonds and Diaspora bonds for the financing of the Federal Government of Nigeria 2017 Appropriation Act and Capital Expenditure Projects in the Act.
“Issuance of Eurobond in the ICM and/ or Loan Syndication by banks in the sum of $3 billion for re-financing of maturing domestic debts obligations of the Federal Government of Nigeria, while looking forward to the timely approval of the National Assembly to enable Nigerians to take advantage of these opportunities for funding,” the letter read in part.
The development comes a week after the upper legislative chamber countered the Minister of Finance, Kemi Adeosun, over claims that the National Assembly was yet to approve President Buhari’s borrowing plans needed to fund capital projects in the 2017 budget.
Adeosun, had while giving a report on the level of the implementation of the 2017 budget before a Joint Senate Committees on Appropriation and Finance last week, claimed that the Federal Government cannot fund capital projects because the National Assembly was yet to approve borrowing plan requests from the President.
But the Senate insisted said there is no pending loan request currently before it, adding that all Executive requests were approved before the National Assembly embarked on its annual recess in July.
Senate President Bukola Saraki dismissed the claims by the Finance Minister.
“There is no request before us about borrowing we have not approved. We approved all the requests before we went on break. I needed to make this explanation because of what the Minister of Finance said that the National Assembly is holding on to borrowing requests sent by the executive.”
BusinessDay checks on the website of the Debt Management Office (DMO) on Tuesday revealed that Nigeria’s Public Debt Profile stands at N19.636trillion as of June 30, 2017, raising fears that the new loan would mortgage the country’s future.
But Buhari dismissed such fears, insisting that the $3billion loan would not lead to an increase in the public debt portfolio. He said: “The debt already exists in the form of high interest short term domestic debt”.
He listed the capital projects which the proceeds of the $2.5billion loan would be used to fund to include: Mambilla Hydropower Project, construction of a Second Runway at Nnamdi Azikiwe International Airport, counterpart funding for rail projects as well as construction of Bodo-Bonny Road, with a bridge across the Opobo Channel.
The 2017 Appropriation Act has a deficit of N2.356trillion, debt service at N1.663trillion and provision of new borrowing of N2.321trillion respectively.
Breakdown of the borrowing in this year’s budget indicated domestic borrowing of N1.254 trillion and external borrowing of 1.067 trillion.
According to the President, failure to rebalance the FGN’s debt portfolio through substitution of Domestic Debt with less expensive long term External Debt, will continue to expose the country to the risk of high debt service-torevenue ratio, thereby limiting the ability of the Government to execute capital projects and other priority expenditure.
The request is expected to be scheduled in the Order Paper for consideration and referral. Senate Leader Ahmad Lawan is expected to formally lead this session.
If agreed to by lawmakers, the Presiding Officer will then refer it to the appropriate committee for legislative processing.
OWEDE AGBAJILEKE, Abuja
