The Senate has approved President Muhammadu Buhari’s External Loan request of $5.51 billion to enable the Federal Government finance the proposed revised 2020 Budget. The Senate has also approved an External Borrowing of €995 million to enhance Agriculture as well as assist State governments finance critical projects. The approval by the Senate was sequel to the consideration of the report on request for approval of External Loans to finance Priority projects of the Government and projects to support State Governments of the Senator Clifford Ordia, led Senate Committee on Local and Foreign Debts. President Buhari had written to the senate in May 2020 requesting for approval for external borrowing to finance the 2020 budget deficit as well as priority projects to manage the COVID-19 pandemic.
Presenting the report, Senator Ordia said that the loan is intended to finance the revised 2020 budget deficit, priority projects to manage the COVID-19 pandemic and improve food security as well as projects by state governments facing fiscal challenges because of the pandemic. According to him, the loan is to be financed by the World bank, International Monetary Fund, African development bank, Islamic development bank and export/import bank of Brazil. The Tenors Range From 7 Years- To 25years At Moderate Interest Rates But Amid Concern That The Latest Approval Will Further Increase Nigeria’s Debt Profile. Ordia said, “The Loan is in the immediate best interest of the Nigerian State and its citizens in dealing with the COVID-19 pandemic in a way that the economy will be positioned for quick recovery and resume growth. While Nigeria’s Total Public Debt Stock is on the increase, it is still relatively low vis-a-vis the country’s GDP and the increased borrowing requirements is needed to sustain the Economic recovery.”
The approved loans are as follows: $750 million from the World Bank for States, Fiscal Transparency, Accountability and Sustainability (SFTAS) programme to provide fiscal support to states. World Bank’s $750 million for the COVID-19 Action Recovery and economic stimulus programme to support state level efforts to protect livelihoods, ensure food security and stimulate economic activity (N-CARES). €671 million, €324 million and €995 million from the Export-Import Bank of Brazil (BNDES) & Deutsche Bank of Germany for the Green Imperative to enhance mechanisation of Agriculture and agro progressing in Nigeria (GIP). In the Committee’s observation, Senator Ordia said, “The Committee notes therefore that the loan styled Covid-19 Action Recovery and Economic Stimulus (CARES) is to support budgeted State Government interventions of the 36 States and the Federal Capital Territory in their effort to mitigate the impact of the Covid -l9 pandemic on the livelihoods of poor and vulnerable households and micro enterprises. The Committee notes that these interventions are intended to target existing and newly vulnerable and poor households, farmers, Micro and Small Enterprises (MSEs) affected by the Economic crises caused by the pandemic.
” The Committee notes that the financing will be used to support scaling up existing safety net interventions at the State level by expanding the coverage of Social Transfers, and Labour intensive Public Works opportunities in the social sectors, Livelihood Grants and Social Services Infrastructure micro projects. The Committee further notes that the financing will be used to support scaling up of intervention that will help farmers increase food production and facilitate smooth functioning of the food supply chain. The Committee further notes that the financing will also be used to support scaling up interventions that will help MSEs through grants to support post COVID 19 loans, grants to support operational cost. The Committee notes that each State is entitled to access $20,000,000 grant under the program provided that it achieves a minimum of 4 Disbursement Linked Indicators.
“The PCT is entitled to $15,000,000.” Speaking further, Senator Ordia said that ” The Committee observed that the financing for the GIP, Additional financing for SFTAS and CARES are being sourced from Multilateral and Bilateral global Lenders and partners with proven track record of previous financial accommodation and support to Nigeria. The Committee notes that the borrowings are largely concessional loans with low interest rates and a reasonable moratorium and payback period. The Committee most importantly notes that the indicative terms and conditions under which the loan will be borrowed, there are no unusual or onerous conditions attached and the terms do not in any manner compromise the sustainability of the Nigerian economy or impugn the integrity and independence of Nigeria as a sovereign Nation.
