Buhari Seeks Senate’s Approval For Fresh $5.5 Billion Loan To Complete 2017 Budget

President Muhammadu Buhari has asked the National Assembly to approve two external loans worth $5.5 billion. But the terms and conditions for such facilities are not made known.According to Buhari in a letter read by Senate President, Bukola Saraki, during a plenary session yesterday, the first loan of $2.5 billion is for the financing of the deficit and capital projects in the 2017 budget. The second loan of $3.0 billion is for the refinancing of maturing domestic debt obligations through the issuance of Eurobonds or a loan syndication.

The president informed the legislators that the terms and conditions of the loans would only be known when they are ready for collection.“With respect to the terms and conditions of the proposed external borrowings, the Senate may wish to note that being market-based transactions, the terms and conditions of the borrowings can only be determined at the point of issuance of finalisation based on prevailing market conditions in the International Capital Market (l.C.M.),” he declared.

The request generated an initial controversy on the floor of the Senate as the lawmakers protested against the earlier impression that the request had been pending before the Senate and that its delay in approving it had caused a major hitch in the implementation of the budget.

Justifying his loan request of $2.5 billion, President Buhari invited the Senate to “note that in order to implement the external borrowing approved by the National Assembly in the 2017 Appropriation Act, the Federal Government issued a $3OO million Diaspora Bond in the International Capital Market (ICM) in June 2017.The balance of the 2017 external borrowing, in the sum $3.2 billion is planned to be partially sourced from issuance in the ICM of $2.5 billion through Eurobonds or a combination of Eurobonds and Diaspora Bonds, while $700 million is proposed to be raised from multilateral sources.“It should be noted that the intention is to issue the Eurobonds first, with the objective of raising all the funds through Eurobonds, and that Diaspora Bonds will only be issued where the full amount cannot be raised through Eurobonds.”

He listed the projects as the Mambilla Hydropower Project; construction of a second runway at the Nnamdi Azikiwe International Airport; counterpart funding for rail projects and the construction of the Bode-Bonny Road, with a bridge across the Opobo Channel.”

On the $3 billion for the re-financing of domestic debts, the president said: “In addition to the implementation of the external borrowing approved in the 2017 Appropriation Act, in order to reduce debt service levels and lengthen the tenor profile of the debt stock, the Federal Government seeks to substitute maturing domestic debt with less expensive long-term external debt.”

According to him, the Federal Government plans to source $3.0 billion through the issuance of Eurobonds as approved by the Federal Executive Council at its meeting of August 9, 2017.Listing what he believed could be the benefits of the loan, Buhari stated that the proposed re-financing of domestic debt through external debt would achieve more stability in the debt stock while also creating more borrowing space in the domestic market for the private sector.

He drew the attention of the Senate to the fact that in the 2017 Appropriation Act, debt service at N1.663 trillion represents 32.73 per cent of the government’s total expenditure, which makes it important to take urgent steps to reduce debt service costs.