The Nigerian Senate, on Tuesday, received a request from President Muhammadu Buhari for a total of N2,343,387,942,848 from multilateral and bilateral lenders, as well as the International Capital Market (ICM) through the issuance of Eurobonds to part-finance the 2021 Budget Deficit of N5.602tr.
The amount, an equivalent to USD$6,183,081,643.40 at the Budget Exchange Rate of USD$1/N379, was captured as New External Borrowing in the 2021 Appropriation Act (Item No.330), and meant to part-finance this year’s budget.
The request, according to a statement by by Ezrel Tabiowo, Special Assistant (Press) to President of the Senate, was contained in a letter addressed to the Senate President, Ahmad Lawan, and read during plenary.
The request, Buhari explained, was made in line with the provisions of Sections 21(1) and 27(1) of the Debt Management Office (Establishment) Act, 2003, assuring that the country may raise USD$3bn or more, in a combination of tenors between 5 – 30 years.
Buhari explained that the Federal Government’s decision to raise the sum from the International Capital Market was due to the recent monetary policy stance that provides for very low interest rates and ease of moderating debt service cost.
He further added that the proceeds of the USD6.183bn (N2.343tr New External Borrowing in the 2021 Appropriation Act) would be used to fund specific Capital Projects in the Budget.
According to him, the projects already captured in priority sectors of the economy, like: Power, Transportation, Agriculture and Rural Development, Education, Health, Provision of Counterpart Funding for Multilateral and Bilateral projects, Defence and Water Resources.
President Buhari’s letter, “Request For the Resolution of the National Assembly For: The Implementation of the New External Borrowing of N2.343 trillion (about USD6.183 Billion) In the 2022 Appropriation Act”, reads in part:
“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 USD 6,183,081,643.4O at the Budget Exchange Rate of USD1.00/N379) provided as New External Borrowing in the 2021 Appropriation Act (Item No. 330) to part-finance the Budget Deficit of N5.602tr.
“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”.
Buhari recalled “that 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 US$6,183,081,643.40 at the Budget Exchange Rate of USD1.00/N379) is specified as New External Borrowing.
“The President of the Senate may also wish to note that the allocation of N2.343 trillion to New External Borrowing in the 2021 Appropriation Act is consistent with the 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.”
He further noted that the ICM is “now open to issuers like Nigeria and Interest Rate 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.”