The Nigerian government is making a move into the loan market again despite calls to minimize the rate of borrowing that is spiking Nigeria’s debt profile.
On Tuesday, President Muhammadu Buhari’s letter to the Senate seeking approval of $4.179 billion ($4.054 billion and $125 million) as well as £710 million external loans to fund projects captured under the 2018-2021 borrowing plan, was read at the plenary by president of the Senate Dr. Ahmad Lawan.
It was one of the series of Buhari administration’s loan approval requests and the second one in 2021. The president said the external loan will be used to fund critical infrastructural projects in the country.
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Per ThisDay, Buhari in the letter explained that the projects listed in the 2018-2021 Federal Government Borrowing Plan are to be financed through sovereign loans from the World Bank, French Development Agency (AFD), China-Exim Bank, International Fund for Agricultural Development (IFAD), Credit Suisse Group and Standard Chartered/China Export and Credit (SINOSURE) in the total sum of $4,054,476,863.00; €710,000,000.00 and Grant Component of $125,000,000.00.
The fund would be used to fund federal and state projects cut across key sectors such as infrastructure, health, agriculture and food security, energy, education and human capital development and COVID-19 Response efforts, the president said.
The letter reads in part: “I write in respect of the above subject and to submit the attached addendum to the proposed 2018-2021 Federal Government External Borrowing (Rolling) Plan for the consideration and concurrent approval of the Senate for same to become effective.
“The Senate President may wish to recall that I earlier transmitted a request on the proposed 2018-2020 Federal Government External Borrowing Plan for the concurrent approval of the Senate in May, 2021.
“However, in view of other emerging needs and to ensure that all critical projects approved by FEC as at June 2021 are incorporated, I hereby forward and addendum to the proposed Borrowing Plan.
“The projects listed in the addendum to the 2018-2021 Federal Government External Borrowing Plan are to be financed through sovereign loans from the World Bank, French Development Agency (AFD), China-Exim Bank, International Fund for Agricultural Development (IFAD), Credit Suisse Group and Standard Chartered/China Export and Credit (SINOSURE) in the total sum of $4,054,476,863.00; €710,000,000.00 and Grant Component of $125,000,000.00.”
The letter continues: “The Senate is kindly invited to note that the projects and programmes in the Borrowing Plan were selected based on positive, technical and economic evaluations and the contribution they would make to the socio-economic development of the country including employment generation and poverty reduction as well as protection of the most vulnerable and very poor segments of the Nigerian society.
“The Senate may also wish to note that all the listed projects in the addendum form part of the 2018-2021 External Borrowing Plan and cover both the federal and states government projects and are geared towards the realization of the Nigeria Economic Sustainability Plan that cut across key sectors such as infrastructure, health, agriculture and food security, energy, education and human capital development and COVID-19 response efforts.
“A summary of some key projects in each of the six geo-political zones and a summary on the expected impacts on the socio-economic development of each of the six geo-political zones are attached herewith as Annex II and III.
“Given the importance attached to the timely delivery of the projects listed in the proposed Borrowing Plan and the benefits both the federal and state governments stand to gain from the implementation of same, I hereby wish to request for the kind consideration and concurrent approval of the Senate for projects listed in the addendum to the 2018-2021 Federal Government External Borrowing Plan to enable the projects become effective.”
Nigeria’s Total Public Debt Stock stood at N33.107 trillion ($87.239 billion) as of March 2021, according to Debt Management Office (DMO), creating a financial burden that is already affecting the country’s economic and infrastructural development.
The budget implementation report presented by Minister of Finance, Budget & National Planning, Mrs Zainab Ahmed in July, noted that the federal government spent 98% (N1.8 trillion) of the total revenue generated in the first five months of 2021 on debt servicing.
With oil still losing its steam and non-oil revenue falling short of Nigeria’s financial needs, Nigeria is increasingly depending on loans to function and may be forced to spend more than it’s generating to service the loans soon if the trend is sustained.