Why we need fresh $21.7bn loan — Finance Minister

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, on Wednesday defended President Bola Tinubu’s request for the National Assembly’s approval of a $20.52bn and €1.045bn external borrowing plan, saying the funds would be invested in critical sectors of the economy.

President of the Senate, Godswill Akpabio, had read a letter from Tinubu on the floor of the Senate on Tuesday, seeking approval for the supplementary external borrowing plan to finance projects and programmes across critical sectors.

Amid criticism over the Federal Government’s failure to specify the projects the proposed borrowing would fund, Oyedele listed the priority areas during a briefing with State House correspondents shortly after the Federal Executive Council meeting chaired by Tinubu.

The minister described the proposed financing as an investment rather than a conventional loan, identifying transportation, defence and security, health, agriculture, energy and power, digital infrastructure, finance and micro, small and medium enterprises (MSMEs), social protection, the environment and education as the priority sectors.

He also listed the ongoing Lagos-Calabar Coastal Highway and Sokoto-Badagry Superhighway, as well as the Kano-Kaduna railway project, among the infrastructure projects expected to benefit from the proposed financing.

Oyedele said, “Altogether, if you convert the euro amount and add it to the dollar amount, it will come up to $21.7bn. And we’ve seen some people with commentary saying that we are borrowing X, Y, Z. I’m pleased and excited to inform you that actually, this does not qualify as borrowing.

“This qualifies as investment, and I will explain that to you in the next few minutes.

“Now, so what is this all about? This is an amount or a plan. First and foremost, this is a plan. It doesn’t mean that we have borrowed. It doesn’t even mean that we will borrow all of it. So, it’s a plan. The average lifespan of the projects under this plan is five years, by the way.

“But this country needs to plan ahead. You can’t be doing everything based on spontaneity and randomness.

“Now, this amount, about $10.6bn out of it, is for investment in transportation infrastructure, from highways and superhighways to rail and other important infrastructure, including Sokoto-Badagry and Lagos-Calabar highways and the Kano-Kaduna rail project.

“The top 10 projects or classifications of where we are investing are, in order: transportation, defence and security, health, agriculture, energy and power, digital infrastructure, finance and MSMEs, social protection, the environment and education.”

The minister argued that the proposed financing would create assets and wealth for the country, saying the value generated would exceed the amount invested.

He said, “Every single naira of these is an investment, and the way this works is that if you borrow $20bn and it is used to create assets and wealth and benefits worth more than $20bn, what you’ve actually done is create a net asset. So, it means that the country is better off as a result of that investment.

“You know, anybody and everybody today will agree that if Aliko Dangote was going to save money to build the refinery, it would not be built in his lifetime. So, he had to take the financing, the investment, to make it happen.

“$20bn is listed now in less than four years, and the value has more than doubled. This is exactly what we are doing for our country. So, this $21.7bn investment would more than double in a few years down the line, and the beneficiaries will certainly be the Nigerian people.”

Oyedele also disclosed that part of the proposed financing would support investments in the social sector, including health, education, agriculture, climate initiatives, energy and social protection.

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He said the social sector component would be financed through concessional loans with an average interest rate of about two per cent.

“Now, the other point is that in this $21.7bn, this is very good to note. At least for me, it’s good news. The social sector within all these investments is being funded or planned to be funded by concessional loans with interest rates of just about two per cent on average.

“This is the world saying we want to invest in Nigeria. So, that will cut across investments in energy, social protection, agriculture, climate, education and health.

“And then there is strong development partner support, with about $7.9bn of that coming from multilateral and bilateral partners, led by the World Bank, with $5bn at concessional rates, averaging 2.1 per cent.

“In addition to that, we have regional development finance institutions, export credit agencies and banks. And even for the commercial components of this borrowing, just wait for it. The average indicative rate is 7.8 per cent, which is even below the rates for our Eurobonds, which means you’re getting a deal as a country, even on the commercial investment.”

Oyedele further clarified that the proposed $21.7bn financing plan was not exclusively for the Federal Government, noting that some state governments had approached multilateral financial institutions for funding for projects in their respective states.

He said, “It’s important to note, the last point, that this amount is not for the Federal Government alone. The Federal Government has the responsibility and the constitutional duty to be the interface for all external borrowing.

“So, I’ll give you the data: $3.3bn of this amount is actually for states and the FCT projects, $1.5bn. So, states plus FCT, that is $4.8bn, is for subnational projects and some agencies and development finance institutions.”

The minister urged Nigerians to consider the economic benefits of borrowing when assessing the proposed financing plan, arguing that loans used to create value could strengthen the country’s economic position.

He said, “I took the pain to put this analysis together, and I have copies for you because this is one area where we have to be honest with ourselves as Nigerians. There are people who will tell you borrowing is bad, and you just need to ask them: in which country on this planet do you run the economy without borrowing?

“To the extent that you borrow one naira to create value of more than one naira, you should please borrow more. And to have a president who understands these issues and thinks big for our country, investing in transformative infrastructure, human development and the digital economy, I think we should all be very excited at what is ahead of us as a people and a nation.”