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Nigeria’s Debt Profile To Hit N36.3trn As President Buhari Seeks Fresh N2.3trn Loan

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President Muhammadu Buhari has sought the approval of the National Assembly for a new external borrowing plan of N2.343 trillion (about $6.183 billion) as contained in the 2021 budget.

This new borrowing will raise Nigeria debt stock to about N33 N36.3 trillion.

The president also urged the National Assembly to approve a list of all donor-funded projects under the 2018-2020 Federal Government External Borrowing (Rolling) Plan.

The president’s request was conveyed in two separate letters addressed to the Speaker of the House of Representatives, Femi Gbajabiamila, which was read on the floor of the House by the Deputy Speaker, Ahmed Idris Wase.

The Senate had recently approved foreign loans of $1.5 billion (about N571.5billion) and €995 million (about N528.4billion) which amount to N1.1trillion for the federal government.

The Debt Management Office (DMO) had in the previous month put Nigeria’s Public debt at N32.915trillion as of December 31, 2020.

This is made up of the debt stock of the federal and state governments as well as the Federal Capital Territory (FCT).

The DMO said at the time that “total Public Debt to Gross Domestic Product as at December 31, 2020 was 21.61 per cent, which is within Nigeria’s new limit of 40 per cent.”

LEADERSHIP recalls that the Senate had approved the borrowing of $1.5 billion and €995 million, or N1.1 trillion (when calculated at the CBN official exchange rate of $1 to N381) for both the federal and state governments from the foreign market in April 2021.

The Debt Management Office (DMO) clarified the recent borrowing yesterday, saying “The proposed new capital raising is the New External Borrowing already provided for in the 2021 Appropriation Act.”

The 2021 Appropriation Act included new domestic and new external borrowing after approval by the National Assembly.

The Debt office said the new capital raising has already been approved and is now being presented to NASS in order to fulfil the provisions of Sections 21 and 27 of the DMO (Establishment, etc.) Act, 2003.

“The proceeds are to be deployed to capital projects in various sectors of the economy, including power, transport, agriculture and rural development, education, health and water resources that are included in the 2021 Appropriation Act,” DMO said in its verified Twitter handle.

In the letter addressed to the Senate president, Ahmad Lawan, dated May 6, 2020, which was read during plenary yesterday, President Buhari also asked the Senate to approve donor fund projects under the 2018-2020 federal government external borrowing (rolling) plan.

The first letter to the House stated: “The purpose of this letter is to request for a Resolution of the National Assembly (NASS) to raise the sum of 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 (Item No. 330) to part-finance the Budget Deficit of N5.602 trillion.

“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”.

The letter further said, “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 N2,343,387,942,848.00 (about USD 6,183,081,643.40 at the Budget Exchange Rate of USD1.00/N379) is specified as New External Borrowing.

“The allocation of N2.343 trillion to New External Borrowing in the 2021 Appropriation Act is consistent with 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.

“I wish to bring to the attention of the Right Honourable Speaker 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$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 5-30 years; the outcome would, however, be determined when Nigeria approaches the market.

“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.

This includes 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.

In the second letter to the lawmakers, the president said, “It is with pleasure that l forward the list of all the donor-funded projects under the 2018-2020 Federal Government External Borrowing (Rolling) Plan for the consideration and concurrent approval of the House of Representatives for same to become effective.

“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 a total sum of USD 3,837,281,256 plus Euro 910,000,000 and Grant Component of USD 10,000,000.

“The Speaker may wish to know 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.

“The Speaker may also wish to know that all the listed projects form part of the 2018 2020 External Borrowing Plan and covered both the Federal and States Governments’ Projects and are geared towards the realization of the Nigeria Economic Sustainability Plan that cut across key sectors such as Infrastructure, Health, Agriculture and Food Security, Energy, Education and Human Capital Development and COVlD-19 Response efforts.”

For the Senate, President Buhari said the upper chamber’s approval would enable projects listed under 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 EXIMBank, China Development Bank, European Investment Bank, European ECA, KtW, lPEX, AFC, India EximBank and International Fund for Agricultural Development (IFAD) at a total sum of USD 36,837,281,256 plus Euro 910,000,000 and Grant Component of $10,000,000.

He added that the projects are geared towards the realization of the Nigerian Economic Sustainability Plan that cut across key sectors such as Infrastructure, Health, Agriculture and Food Security, Energy, Education and Human Capital Development and COVID-19 Response efforts in the six geo-political zones of the country.

The letter reads: “It is with pleasure that I forward the list of all the Donor funded projects under the 2018-2020 Federal Government External Borrowing (RoIIing) Plan for the consideration and concurrent approval of the Senate for same to become effective.

“Distinguished Senate President, you may wish to know 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.

“Distinguished Senate President may also wish to know that all the listed projects form part of the 2018-2020 External Borrowing Plan covered both the Federal and States Governments’ Projects and are geared towards the realization of the Nigerian Economic Sustainability Plan that cut across key sectors such as Infrastructure, Health, Agriculture and Food Security, Energy, Education and Human Capital Development and COVID 19 Response efforts.”

 

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