President Muhammadu Buhari has sought the approval of the National Assembly, borrow about $6.183 billion (about N2.34 trillion) as a new external borrowing plan for the 2021 fiscal year.
The president also stated that it would be partly used to finance the N5.602 trillion deficit in the budget.
The president in another letter, both of which were addressed to the House of Representatives Speaker, Femi Gbajabiamila, and read during plenary of the House of Representatives on Tuesday, also requested for a legislative approval of some donor-funded projects listed in the 2018-2020 external borrowing plan, to be financed through sovereign loans from the World Bank.
African Development Bank (AfDB), French Development Agency (AFD), Islamic Development Bank, China EXIMBank, China Development Bank, European Investment Bank, European ECA. KfW, IPEX, AFC, India EximBank and international Fund for Agricultural Development (IFAD), a total of which he put at a total sum of $3,837 billion, and €910 million.
Explaining the intention of the government on the new borrowing plan, the President stated that “the plan is to raise the sum of USD 6.183 billion from a combination of sources; namely: multilateral and bilateral lenders, as well as from the International Capital Market (ICM) through the issuance of Eurobonds.
“From recent trends in the ICM, it is now possible for Nigeria to raise funds in the ICM and this explains why we are proposing that the New External Borrowing in the 2021 Appropriation Act, should include issuing Eurobonds in the ICM. We estimate that Nigeria may be able to raise USD 3 billion or more, but not more than USD 6.183 billion (the amount provided in the 2021 Appropriation Act) in a combination of tenors between 5 and 30 years; the outcome would, however, be determined when Nigeria approaches the market.
“This request is in line with the provisions of Sections 21(1) and 27(1) of the Debt Management Office (Establishment, Etc.) Act, 2003 (DMO Act). Section 21(1) of the DMO states that ‘no external loan shall be approved or obtained by the Minister unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution’, while Section 27(1) states that ‘the National Assembly may by a resolution approve, from time to time, standard terms and conditions for the negotiation and acceptance of external loans and issuance of guarantees”, the president said.
The president cited certain economic factors stressing that “accessing the ICM will be relatively cheaper thereby moderating debt service cost, and it will also contribute to the level of External Reserves”.
Also on the donor-funded projects, he explained that “the projects and programs in the Borrowing Plan were selected based on positive, technical and economic evaluations as well as the contribution they would make to the socio-economic development of the country including employment generation and poverty reduction as well as protection of the most vulnerable and very poor segments of the Nigerian society”.