NIGERIA’S senate has approved the sum of $2.6bn out of the $5.5bn external borrowing request sent to the National Assembly by President Muhammadu Buhari in May last year as part of the government’s measures to finds ways to fund its current budget.
Last year, President Buhari presented Nigeria’s most ambitious budget ever to the National Assembly when he unveiled a record-breaking N13trn ($33.68bn) package for 2021. However, with over 90% of government revenue coming from the sale of petroleum products the treasury is incapable of financing the budget in the wake of falling demand as a result of the global economic meltdown in the face of the coronavirus pandemic.
Over the last year, the federal government has thus resorted to borrowing heavily from institutions like the World Bank, International Monetary Fund and African Development Bank. It is expected that about a third of the 2021 budget will be financed by borrowing with crude oil prices nit exceeding $65 a barrel and demand remaining relatively weak.
Yesterday, senators decided to approve the loan request after considering a report by the Senate Committee on Local and Foreign Debts. Committee chairman Senator Clifford Ordia, said that under the programme, €995m would go towards financing priority projects, while $1.5bn would be disbursed to the 36 state governments.
Out of the total sum approved, $1.5bn is to be sourced from the World Bank, €671m from the Export-Import Bank of Brazil and €324m from the Deutsche Bank of Germany. Under the terms of the package, the tenor of the World Bank loan is 25 years at an interest rate of 2.45% per annum, while that from the Export-Import Bank of Brazil is for 15 years at an interest rate of 2.935% and that of the Deutsche Bank of Germany is for seven years with a 2.87% interest rate.
Senator Ordia disclosed that €995m would be deployed to finance priority projects to address the impact of the Covid-19 pandemic and to improve Nigeria’s food security through the mechanisation of agriculture and agro-processing. He explained that a total of six indigenous assembly plants, one in each geo-political zone have been identified and would be rehabilitated to assemble knocked-down mechanised farm machinery and equipment to be imported from Brazil.
On providing fiscal support to states across the federation, Senator Ordia disclosed that the sum of $750m from the World Bank would be used to finance States Fiscal Transparency, Accountability and Sustainability programme in all states of the federation and the Federal Capital Territory. He noted that the said financing was approved by the National Assembly in June 2020 as part of the $1.5bn Development Policy Financing.
In addition, Senator Ordia explained that another $750m would be used to finance the Covid-19 action recovery and economic stimulus programme to support efforts by state governments to protect livelihoods, ensure food security and stimulate economic activity. Senate president Senator Ahmad Lawan, advised Senator Ordia’s committee to liaise with the Debt Management Office for updates on the total loans accessed by the federal government.