Senate okays fresh $16bn loans for Buhari’s administration
November 11, 2021
Nigeria’s debt stock of N35.5tn will rise to N42.7tn following the Senate’s approval of the Federal Government’s request for $16bn and €1.02bn fresh loans.
The $16.2bn loan is equivalent to N6.7tn using the Importers and Exporters’ Window exchange rate of N411.24/$1, while the €1.02bn is equal to N485.5bn using the Central Bank of Nigeria’s exchange rate f N476/ €1. These bring the value of the loans to be acquired to N7.2tn.
The Senate had on Wednesday approved the foreign loan plans of the President, Major General Muhammadu Buhari (retd.), in which he sought to borrow the sum of $16.2bn, €1,02bn and a grant component of $125m to fund some “legacy projects.”
The Senate also approved the request of the Bank of Industries for the issuance of €500m, but not more than €750m Eurobond in the international capital market.
The red chamber’s approval of the loan requests was, however, accompanied by a resolution that the terms and conditions of the loans from the funding agencies be forwarded to the National Assembly prior to their execution for approval and proper documentation.
The approval followed the consideration of a report by the Senate Committee on Local and Foreign Debt on the proposed 2018-2020 External Borrowing (Rolling) Plan.
The Chairman of the committee, Senator Clifford Ordia, in his presentation, said Buhari’s request was in compliance with the provisions of the Debt Management Office (Establishment) Act, 2003 and the Fiscal Responsibility Act, 2007.
Ordia said the provisions of the statutes enjoined the President to seek and obtain the approval of the National Assembly in respect of the external borrowing programme of the federation and states.
The senator explained that out of the total amount approved by the National Assembly, $3,529,300,000 would be sourced from the World Bank.
He said $5.07bn would be sourced from the China Exim Bank; and $3.9bn from the Industrial and Commercial Bank of China.
Ordia stated that $2.8bn was being expected from the China Development Bank; and $698m from the Africa Development Bank.
He added that €345m was being expected from the French Development Agency; €175m from the European Investment Bank; and $190m from the European ECA/KfW/IPEX/AFC.
The lawmaker also said €500m would be sourced from the international capital market; and $62.1m from Standard Chartered Bank/SINOCURE.
Ordia explained that the committee noted the serious concerns of Nigerians about the level and sustainability of the country’s borrowing in the last decade.
He, however, said Nigeria’s debt figures, which continue to increase, reached an all-time high of around 95 per cent of retained revenue and 35 per cent of its annual expenditure.
The senator said the development constituted a drain on the nation’s economy and limited resources available for national development.
Underscoring the need for a more proactive approach to revenue enhancement, the lawmaker observed that “there are noticeable improvements in our revenues, but the growth is not sufficient or rapid enough to catch up with the pace of development required for our nation.”
Why we increased Buhari’s loans request by $12bn – Senator
Ordia also stated that out of the sum of over $22.8bn approved by the National Assembly under the 2016-2018 External Borrowing Plan, only $2.8bn, which represented 10 per cent, had been disbursed to Nigeria.
The lawmaker said the projects, which required additional financing, would have great multiplier effects on stimulating economic growth through infrastructure development, job creation, poverty alleviation, health care, and improve the nation’s security architecture.
He emphasised that tax revenues accruable to the government would increase as a result of the impact of commercial and engineering activities.
Health sector gets $450m to fight malaria, others
The President’s loan requests also include $450m for the Ministry of Health and the National Centre for Disease Control to accelerate nutrition immunisation and malaria progress by accelerating the coverage and transforming service project from the World Bank.
They also include the Nigeria COVID-19 preparedness and response project.
Senate demands loans’ terms, conditions
The Deputy Senate President, Ovie Omo-Agege, said the executive arm of government must furnish the National Assembly with details of the loans as well as the terms and conditions.
He said, “The approval we are giving today is to enable the executive to commence negotiations.
“We have not given approval to the terms and conditions. We have not seen that. I don’t know what that is. We are now saying that the terms and conditions should be brought back to us for approval.”
The Chairman, Senate Committee on Judiciary, Human Rights and Legal Matters, Senator Opeyemi Bamidele, said, “What is before us is the issue of the request for approval. What they have come to seek is approval not a concurrence.”
More borrowings’ll put Nigeria in unfavourable conditions – Experts
The Chief Executive Officer, SD&D Capital Management, Idakolo Gbolade, told The PUNCH that although borrowing was not bad, the projects for which the loans were being sought should be able to pay back the debts.
“The government borrowing to fund infrastructure is not bad, but the problem is that the projects should be made to repay the loans. The government needs to look into this. For example, projects like roads should be tolled and proceeds used for repayment as well as railways, etc,” he said.
Gbolade added that although the country was still within the appropriate debt ratio, more borrowings would put the country in unfavourable conditions, which would jeopardise the future of unborn generations.
“Presently, Nigeria is still within the debt ratio, according to World Bank standards, but further borrowings with conditions that are not favourable to our sovereignty should be adequately examined in order not to put generations yet unborn in perpetual debt,” he added.
The Chief Executive Officer, Economic Associates, Dr Ayo Teriba, urged the government to restructure its debt portfolio.
He said, “Nigeria should aggressively restructure its debt portfolio by replacing interest-paying commercial bonds with interest-free commercial bonds on a wholesale basis to drastically reduce or eliminate the N4.9tn annual average interest payments that are projected in the 2022-2024 MTEF.
“Rather than issue interest-paying bonds to fund infrastructure, we should create special purpose vehicles for packaging infrastructure assets for interest-free financing through asset-linked non-convertible or convertible bonds. Ideally, this should happen in a rule-based fiscal regime with an independent advisory fiscal commission as a watchdog.”
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