BUHARI WRITES SENATE FOR APPROVAL TO BORROW $3BN EXTERNAL LOAN
BUHARI WRITES SENATE
FOR APPROVAL TO BORROW $3BN EXTERNAL LOAN
Buhari Writes Senate for Approval to
borrow $3bn External Loan
President Muhammadu Buhari has
written the Senate to seek approval for external loan to the tune of $3
billion.
The president also sought the
lawmakers’ approval to issue a $2.5 billion Eurobond or Diaspora bond in the
international market.
In a letter read by the Senate
President, Bukola Saraki, the president said the bonds would be channelled
towards funding of the 2017 budget while the loan would be used in 
refinancing
of maturing domestic debts.
refinancing
of maturing domestic debts.
“The Senate may wish to know that in
order to implement the external borrowings approved by National Assembly in the
2017 appropriation act, the FGN issued $300 million diaspora fund in the
International Capital Market, ICM in June 2017,” the letter said.
“The balance of the 2017 external
borrowing in the sum of $3.2 billion is planned to be partially sourced in the
ICM of $2.5 billion through Eurobonds or a combination of Eurobonds and
Diaspora bonds, while $700 billion is proposed to be raised from multilateral
sources.
“It should be noted that intention is
to issue the Eurobonds first with the objective of raising all the funds
through Eurobonds and Diaspora bonds will only be issued when the full amount
cannot be raised through Eurobonds.
“The Senate may wish to know that the
proceeds of the proposed issuance of Eurobonds and and Diaspora bonds in the
ICM will be used to finance the deficit of the 2017 appropriation act and
provide funding for capital projects in the budget.
“The projects include the Mambilla
hydro-power project, construction of the second runway of the Nnamdi Azikwe
International Airport, counterpart funding of rail projects and construction of
Bonny road with a bridge across Opobo channel.”
The President also seek the Senate’s approval to borrow $3 billion from external sources to finance the 2017 budget.
The President also seek the Senate’s approval to borrow $3 billion from external sources to finance the 2017 budget.
“In order to reduce debt service
levels, and letting tenure profile of debt stock, the FGN seeks to substitute
maturing domestic debts with less expensive long term external debts. The FGN
seeks to source $3 billion through issuance of Eurobonds to the ICM and or loan
syndication by banks as approved by the Federal Executive Council.
“It is important to note that the
proposed sourcing of $3billion from external sources to refinance maturing
domestic debts will not lead to an increase in public debt profile because debt
already exist, rather, the substitution of domestic debts with relatively
cheaper and long term external debts will lead to a significant decrease in
debt service cost. This will also achieve more stability in the debt stock
while also creating more borrowing space in the domestic market for the private
sector.
“The Senate will recall that in the
2017 appropriation act, debt service had 1.66 trillion representing 32.73% of
the FGN’s total expenditure which makes it important to urgent steps to reduce
debt service cost,” the letter read.
The president noted that the terms of
issuance of the bonds will be determined by the current condition of the
International Capital Market.
The Minister of Finance, Kemi
Adeosun, had last week told the Senate Joint Committee on Appropriation and
Finance that the inability to access foreign loans was a major impediment to
funding of capital projects in the 2017 budget.