The Senate yesterday gave the federal government the nod to borrow a total of $2.7 billion out of the $5.5 billion external borrowing request sent to the National Assembly by President Muhammadu Buhari in May last year.
The external loans comprise $1.5 billion, to be sourced from the World Bank, and €995 million ($1.2 billion) from other international agencies, for the federal and state governments.
If the loans are accessed, it will jack up Nigeria’s total public debt, which as of December 31, 2020 was N32.915 trillion ($84.574 billion), according to data from the Debt Management Office (DMO).
Of this, 37.82 per cent was external, while the balance of 62.18 per cent was domestic.
The Senate also approved N257,183,671,694.71) for the Nigeria Customs Service (NCS) for the 2021 fiscal year.
The approval for the external borrowing, at yesterday’s plenary, followed the consideration and adoption of a report of the Senate Committee on Local and Foreign Debts, chaired by Senator Clifford Ordia (Edo Central).
President Muhammadu Buhari had last May requested the Senate to approve the external borrowing to finance various priority projects of the federal government and to support the state governments facing fiscal challenges.
Ordia, while presenting the report, said $1.5 billion would be sourced from the World Bank to finance projects of state governments facing fiscal challenges arising from the COVID-19 pandemic, while the €995 million would be sourced from other multilateral and bilateral global lenders.
The tenor/moratorium of the loan to be sought from the World Bank is 25 years at an interest rate of 2.45 per cent per annum; while that from the Export-Import Bank of Brazil is for 15 years at an interest rate of 2.935 per cent; and the loan request from the Deutsche Bank of Germany for seven years at a 2.87 per cent interest rate.
The lenders, according to him, have proven track record of previous financial accommodation and support to Nigeria.
Ordia said the loan for the states would be used to fund projects under the States’ Fiscal Transparency, Accountability and Sustainability (SFTAS) programme and 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).
He stated that the interventions would target existing and newly vulnerable and poor households, farmers, Micro and Small Enterprises (MSEs) affected by the economic crises caused by the pandemic.
According to him, the €995 million to be sourced from the Export-Import Bank of Brazil (€671, 000,00) and Deutsche Bank of Germany (€324,000,000) is to finance the federal government’s Green Imperative Project to enhance mechanisation of agriculture and agro process in Nigeria to improve food security.
He said the $750,000,000 for States Fiscal Transparency, Accountability and Sustainability programme would be sourced from the World Bank, while the $750,000,000 COVID-19 Action recovery and economic stimulus programme to support states’ efforts at protecting livelihoods and ensuring food security, will also be sourced from the World Bank.
Ordia said the borrowings were concessional loans with low interest rates and a reasonable moratorium and payback period.
He added that each state is entitled to access a $20,000,000 grant under the programme provided that it achieves a minimum of four disbursement linked indicators while the PCT is entitled to $15,000,000.
He said: “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.”
In his contribution, Senator Solomon Olamilekan (APC, Lagos West) said going ahead to approve the loan request would demonstrate the proactiveness by the National Assembly to insulate the economy from a possible decline.
Deputy President of the Senate, Senator Ovie Omo-Agege (APC, Delta Central) sought to know if the committee in coming up with its recommendations was privy to the terms and conditions of the loan agreement.