Nigeria: Buhari Seeks NASS Approval to Take Another $6.1 Billion Loan

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Nigeria: Buhari Seeks NASS Approval to Take Another $6.1 Billion Loan
Mr Buhari says the loan will be used to finance the 2021 budget deficit.
President Muhammadu Buhari is seeking to borrow another $6.1billion from bilateral and multilateral organisations to fund the deficit in the 2021 budget.

The president, in a letter to both chambers of the National Assembly on Tuesday, asked for their approval to take the fresh loan.

The Deputy Speaker of the House of Representatives, Idris Wase, read the letter from the president during the plenary.

The President of the Senate, Ahmad Lawan, read the letter during the plenary session of the upper legislative chamber on Tuesday.

Using the $1 to N379 exchange rate, the new loan will amount to about N2.343 trillion.

The 2021 budget has a deficit of N5.6trillion.

Mr Buhari disclosed that the National Assembly already approved the borrowing of N4.6 trillion in the 2021 Appropriation Act.

He noted that the new borrowing of N2.3 trillion will part-finance the deficit in the 2021 budget.

"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," Mr Buhari's letter reads in part.

"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."

Mr Buhari also said part of the loan will be sourced from International Capital Market (ICM) through the issuance of Eurobonds.

He explained further that Nigeria can now access the ICM, noting that the country is targeting raising a minimum of $3billion from ICM, but not more than the entire $6.1billion.

"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," he said.

Mr Buhari also said that In the "case of Eurobonds, 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."

He, therefore, said the Ministry of Finance and Debt Management Office will work with Transaction Advisers appointed by the federal government.

He further explained that the loan will be used to fund "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."

Meanwhile, the president in a separate letter, also read by Mr Idris, is also seeking the concurrence of the House for the donor projects in the 2018-2020 borrowing rolling plan.
According to the president, projects under the 2018-2020 borrowing plan is $36.8billion, €900million and a grant of $10million.

The projects are to be financed from 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).

Growing deficit

In October 2020, when the president presented the 2021 budget, he acknowledged the fact that the deficit in the proposed budget was more than the three per cent threshold as established by the Fiscal Responsibility Act, 2007.

The Act provides that the deficit should not be more than three per cent of GDP.

Mr Buhari had said the measure was necessary due to the "existential challenge of coronavirus pandemic and its aftermath; I believe that this provides a justification to exceed the threshold as provided for by this law."

PREMIUMTIMES had in an exclusive report revealed plans by the Buhari's administration to sell some assets of the federal government to finance the 2021 budget.
Some of the assets include unnamed refineries, the International Conference Centre, Abuja Water Board and several others.

Growing debt crisis

According to the Debt Management Office (DMO), Nigeria's total public debt as of December 31, 2020, was N32.915 trillion.
Last month, the National Assembly approved loan request of $1.5billion and €995million for the Buhari administration.

By Bakare Majeed

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