Nigeria’s Senate has approved President Muhammadu Buhari’s request for N2.343tr ($6.183bn) as External Borrowing in the 2021 Appropriation Act, to be sourced through the Issuance of Eurobond in the International Capital Market.
The legislators directed the Minister of Finance, Budget and National Planning, Zainab Ahmed, the Director General of the Debt Management Office, Patience Oniha, and the Governor of the Central Bank of Nigeria, Godwin Emefiele, to submit within 10 working days (excluding the day of close of trading), a letter containing the US$ amount so raised and received as a result of the approval together with the applicable exchange rate.
The approval by the upper chamber, according to a statement by Ezrel Tabiowo, Special Assistant (Press) to President of the Senate, followed the consideration of a report by the Committee on Local and Foreign Debts.
Chairman, Senator Clifford Ordia (PDP, Edo Central), said that in considering the President’s request, the Committee noted the serious concerns of Nigerians about the level of sustainability and servicing of Nigeria’s External Borrowing.
“Due to the short fall in our annual revenues in relation to our need for rapid infrastructural and human capital development, we had to pass deficit budget every year requiring us to borrow to finance the deficit in our budget,” he said.
Ordia explained that the new borrowing was calculated at Exchange rate of USD1/N379, and raised from multiple sources – multilateral and bilateral lenders through the issuance of Eurobonds in the International Capital Market.
He emphasized that the proceeds of the USD$6.183bn would be used to fund various specific capital projects specifically from priority sectors of the economy namely; Power, Transportation, Agriculture, and Rural Development, Education, Health, Provision of counterpart funding for Multilateral and Bilateral Projects, Defense and Water Resources.
The lawmaker disclosed that the final terms and conditions – the interest rate and tenors in the case of Eurobonds – can only be determined at the point of issuance of the Bonds in the International Capital Market and would be subject to market conditions prevailing at the time of issuance.
He added that the Primary listing of the Bond will be on the London Stock Exchange while the Secondary Listing will be on the Nigerians Exchange and Financial Markets Dealers Quotations (FMDQ) Securities Exchange.
Ordia observed that, “multilateral and bilateral institutions operate on standard terms and conditions and Nigeria secures the best terms and conditions within the context of the market.”
Accordingly, the Senate while adopting the resolutions of the Committee on Local and Foreign Debt approved the issuance of $3 billion USD but not more than $6,183,081,643.40 Eurobond in the International Capital Market for the implementation of the new External Borrowing of N2,343,387,942,848, for the financing of part of the deficit authorized in the 2021 Appropriation Act.
It also approved that the amount authorized may be raised from multiple sources such as the International Capital Market and any other Multilateral or Bilateral sources as may be available.
In addition, the upper chamber directed the Minister of Finance, Budget and National Planning, the Director General of the Debt Management Office and the Governor of the Central Bank of Nigeria to submit to the National Assembly within ten working days (excluding the day of close of trading) a letter containing the United States Dollars amount so raised and received as a result of the approval together with the applicable exchange rate.
Commenting, the Senate President, stressed that the approved external borrowing is not a fresh loan by the President Buhari administration but a request captured in the 2021 Appropriation Act passed by the National Assembly last year.
He, however, tasked Committees of the National Assembly to carry out strict oversight on how the loans are applied to the implementation of the 2021 budget, just as he urged Ministries, Departments and Agencies of Government entrusted with the management of the funds to ensure prudent application to projects across the country.
“Our committees should be alert on how the funds that will be borrowed will be used.
“No frivolous expenditures should be entertained. I imagine that everybody in the trust of public funds, especially this laws will be as prudent and economical as possible”, he said.
Meanwhile, the Senate, also on Wednesday, approved the sum of N982.729bn as supplementary budget for the 2021 fiscal year, representing an upward review of N86.9bn from the initial amount of N895.842bn transmitted to the National Assembly by President Muhammadu Buhari about two weeks ago.
The passage of the supplementary Appropriation Bill 2021, followed the consideration of a report by the Committee on Appropriation during plenary.
Chairman of the Appropriation Committee, Senator Barau Jibrin, in his presentation explained that the sum of N45.63 billion required for COVID-19 vaccine Programme would be sourced through existing World Bank Loan as well as other Grants.
He added that the balance of N37.93 billion would be sourced from Special Reserve/Levy Accounts comprising: TSA (Foreign currency component) – N25 billion; MOFI CHQ optional – N5 billion; and Foreign Revenue E-Collection – N30 billion; 65 percent Wheat Floor Levy – N15 billion; 5.15 percent Wheat Grain Levy – N15 billion; and Rolled-Over Capital (unspent) – N5 billion.
The lawmaker disclosed that the balance of N722.40 billion which is for capital expenditure on procurement of additional equipment for the security and capital supplementation would be sourced from new borrowing.
Barau explained that the Committee in line with the harmonised position with its House of Representatives counterpart recommended an upward review of the funding of some Security Agencies that were grossly underfunded or not funded in the supplementary Appropriation Bill.
The lawmaker listed the Agencies to include the Nigerian Navy, Ministry of Police Affairs, Defence Intelligence Agency, Department of State Security Services (DSS) and Economic and Financial Crimes Commission (EFCC).
A breakdown of Capital Expenditure for Ministries, Departments and Agencies of Government in the supplementary budget shows that N8,500,000,000 was approved for the Ministry of Police Affairs; N22,586,121,511 for Police Formations and Command; N33,673,461,231 for the Defence Headquarter; N207,543,863,993 for the Nigerian Army; N157,780,421,836 – Nigerian Navy; N239,477,882,473 – Nigerian Air Force; N43,326,943,687 – Defence Space Administration; and N16,887,229,426 – Defence Intelligence Agency.
Others include: Nigeria Security and Civil Defence Corps – N14,822,575,648; Office of the National Security Adviser – N17,000,000,000; Department of State Services – N17,500,000,000; National Intelligence Agency – N4,870,350,000; Economic and Financial Crimes Commission (EFCC) – N3,500,000,000; and National Agency For the Control of AIDS (NACA) – N1,685,000,000.
Under the Federal Ministry of Health, the sum of N2,800,000,00 was approved for the procurement of Molecular Laboratory Equipments to Hospitals (N300m), National Orthopedic Hospital, Igbobi (N300m), National Eye Centre, Kaduna (N300m), National Fistula Centre, Abakaliki (N300m), National Fistula Hospital, Sokoto (N300m), Federal Neuro-Psychiatric Hospital, Calabar (N300m), University of Nigeria Teaching Hospital (N300m), Federal Medical Centre Asaba Annex Aniocha (N300m) and FMC Nguru (N400m).
In addition, the sum of N6,715,338,874 was approved for the Procurement and Installation of New Oxygen Plants Nationwide and Repairs of Oxygen Plants in FCT Hospitals; and N60,728,332,500 for Vaccines Procurement Cost (Federal Government of Nigeria Funding – $298,500,000 for 29.85 million Johnson & Johnson Vaccines.
