Senate has given its approval to Buhari led federal government to go ahead and borrow a total of $6.18billion that is N2.3 trillion from External sources to fund the 2021 budget deficit. The approved external borrowing which is for the issuance of $3,000,000,000, but not more than $6,183,081,643.40, Eurobond in the International Capital Market for the implementation of the N2,343,387,942,848 is for the financing of part of the deficit authorised in the 2021 Appropriation Act. According to the Senate, the amount authorised above may be raised from multiple sources such as the International Capital Market and any other Multilateral or Bilateral sources as may be available. Nigeria External Debt reached $32.9 billion in March 2021, compared with $33.3 billion in the previous quarter.
Nigeria External Debt reached an all-time high of $33.3 billion in December 2020 and a record low of $3.3 billion in March 2007. In the latest reports of Nigeria, Current Account recorded a deficit of $3.3 billion in September 2020. Foreign Direct Investment (FDI) increased by $775.2 million in Sep 2020. Nigeria Direct Investment Abroad expanded by $636.9 million in December 2020. Its Foreign Portfolio Investment fell by $476.5 million in December 2020.
The approval granted by the Senate was sequel to the consideration of the Senator Clifford Ordia, led Senate Committee on Local and Foreign Debts. The loan will bring Nigeria’s external debt profile to $40 billion when executed. Nigeria rising debt is a source of worry to analyst and economist in Nigeria. The Senate has however directed the Minister of Finance, Budget and National Planning, Zainab Ahmed; the Director General of the Debt Management Office, DMO, Patience Oniha and the Governor the Central Bank of Nigeria, CBN, Godwin Emefiele to submit to the National Assembly within Ten (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.
The sum is expected to be sourced through the Issuance of Eurobond in the International Capital Market. In his presentation, Chairman of the Committee, Senator Clifford 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. Ordia said, “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.”
The Senator who 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, however emphasized that the proceeds of the USD$6.183 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.
Ordia 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, adding 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 (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.” In his remarks, the President of the Senate, Senator Ahmad Lawan explained 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.
Lawan who tasked Committees of the National Assembly to carry out strict oversight on how the loans are applied to the implementation of the 2021 budget, urged Ministries, Departments and Agencies of Government entrusted with the management of the funds to ensure prudent application to projects across the country. Lawan 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 this laws will be as prudent and economical as possible.”
