Barely a month after the Senate approved fresh external loans of $1.5 billion and €995 million for the Federal Government, President Muhammadu Buhari, on Tuesday, sent a fresh request for $6.183 billion ( about N2.343 trillion) external loan to the Red Chamber.
In a letter dated May 6, 2021, and addressed to the Senate President, Ahmad Lawan, President Buhari disclosed that the purpose of his loan request was to part-finance the Budget Deficit of 5.602 trillion.
Tribune Online checks revealed that $1.5 billion and €995 million approved by the Senate last April after considering and adopting the report of the Senate Committee on Local and Foreign Debts, led by Senator Clifford Ordia was for financing various priority projects of the Federal Government and to support the state governments facing fiscal challenges.
Unveiling the target of the fresh loan being proposed, President Buhari disclosed that “the proceeds of the USD6.183 billion (82.343 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. ”
He further informed the Senate that the fresh loan would be raised 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 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 — 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. ”
In a separate letter entitled, “Request for the Senate Concurrent Approval of Donor Fund Projects under the
2018-2020 Federal Government External Borrowing Rolling Plan, ” President Buhari disclosed that the donor-funded projects cut across key sectors such as Infrastructure, Health, Agriculture and Food Security, Energy, Education and Human Capital Development and COVID 19 Response efforts.”
President Buhari further revealed that “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 36,837,281,256 plus Euro 910,000,000 and Grant Component of USD 10,000,000.”
He further assured the Senate 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.
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