ABUJA- PRESIDENT Muhammadu Buhari has written to the Senate, asking for the approval of an External loan of $5.5 billion to enable the Federal government finance the 2017 budget.
The four- page letter which was addressed to Senate President, Bukola Saraki is entitled, " Request for the approval of External Loans for: 1.
In a letter forwarded to the Senate President, Bukola Saraki yesterday, Buhari explained $3 billion would be sourced through Euro bond while, the remaining $2.5 would come from other sources in the Capital Market (ICM), including loan syndications through banks.
He further explained that the proceeds from the proposed issuance of eurobonds and diaspora bond in the global capital market would be used to finance the deficit in the 2017 Appropriation Act and provide funding for capital in the budget.
President Buhari listed the capital projects to include: Mambilla Hydropower Project, Construction of a second runway at the Nnamdi Azikiwe International Airport.
The other segment is to finance Capital component of the 2017 Budget, which implementation has been in limbo. The Act also provides for 1.254 trillion and external borrowing of 1.067 trillion about $3.5 billion.
He further explained that the substitution of domestic debt with relatively cheaper and longer term external debt will lead to a significant decrease in debt service cost.
The 2017 budget has a deficit of N2.356 trillion and some financial experts are already expressing worry over the country's increasing debt stock and advised the government to inject the billions of naira recovered from looters of the economy to fund the budget deficit instead of resorting to foreign loans. This proposed re-financing of domestic debt through external debt will also achieve more stability in the debt stock while also creating more borrowing space in the domestic market for the private sector.
With respect to the terms and conditions of the proposed external borrowings, the President noted that being market-based transactions, the terms and conditions could only be determined at the point of issuance or finalisation based on prevailing market conditions in the ICM.
"It should be noted that current market conditions are considered more favourable than at the time of Nigeria's last issuances of the Eurobond in March 2017 and the Diaspora Bond in June 2017, with secondary market yields lower than the coupons".
"Accordingly, the Senate is requested to kindly approve the following external borrowings: i".