The Senate on Wednesday approved the request of the President, Major General Muhammadu (retd.), to borrow N2,343,387,942,848, to part-finance the 2021 federal budget size of N13trillion.
The Senate resolution followed the approval of its Committee on Local and Foreign Loans as presented by the Chairman, Clifford Ordia.
The Committee recommended that the Senate approves Buhari’s request for the issuance of $3,000,000,000 but not more than $6,183,081,643.40 Eurobond in the International Capital Market.
The External Borrowing of N2,343,387,942,848, according to the panel, should be for the financing of part of the deficit authorised in the 2021 Appropriation Act.
The Committee also recommended that the Senate should approve that the amount authorised may be raised from multiple sources such as the International Capital Market and any other Multilateral or Bilateral sources as may be available.
It also recommended that the Senate directs the Minister of Finance, Budget and National Planning, the Director-General of the Debt Management Office and the Governor the Central Bank of Nigeria to submit to the National Assembly within 10 working days (excluding the day of close of trading) a letter containing the United State Dollars amount so raised and received as a result of the above approval together with the applicable exchange rate.
Ordia 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.
He said, “Due to the shortfall 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.”
Ordia explained that the new borrowing was calculated at an Exchange rate of $1/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 $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 Stock Exchange and Financial Markets Dealers Quotations 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.”
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 authorised in the 2021 Appropriation Act.
It also approved that the amount authorised may be raised from multiple sources such as the International Capital Market and any other Multilateral or Bilateral sources as may be available.
The Senate President, Ahmad Lawan, said the approved external borrowing was not a fresh loan by the regime of the President, Major General Muhammadu Buhari (retd.), 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.
Lawan urged Ministries, Departments and Agencies of Government entrusted with the management of the funds to ensure prudent application to projects across the country.
He said, “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 these laws will be as prudent and economical as possible,” he said.