OrderPaperToday – The Presidency has sought the approval of the Senate for $5.5 billion external foreign loan for implementation of the 2017 budget.
The breakdown of the loan is a $3 billion Euro bond in the international capital market; and $2.5 billion for financing 2017 appropriation act.
This was revealed in a letter read by the president of the senate, Bukola Saraki on Tuesday on the floor of the red chamber
In the letter, President Muhammadu Buhari noted that there is a deficit of 2.356 trillion already in the 2017 appropriation act.
According to Buhari, the infrastructural projects to be funded with the loan include 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 letter reads: “Implementation of the external borrowing plan approved in the 2017 appropriation Act. External borrowing to refinance maturing domestic debts through the issuance of $3 billion Euro bond in the international capital market or through a loan syndication,”
“The senate may wish to refer to 2017 appropriation Act which has a deficit of 2.356 trillion and provisions for near borrowings 2.321 trillion. The Act also provides for 1.254 trillion and external borrowing of 1.067 trillion about $3.5 billion.
“The Senate may wish to know that in order to implement the external borrowings approved by the National Assembly in the 2017 appropriation act, the FGN issued $300 million diaspora fund in the International Capital Market ICM in June 2017.
“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.
“In order to reduce debt service levels, and letting tenure profile of debt stock, the FGN seeks to substitute 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 $3 billion from external sources to refinance maturing 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 reduce debt service cost.”