Less than a week after receiving a letter from President Muhammadu Buhari, the Senate on Tuesday approved the $5.513 billion loan request of the president.
The approval followed the consideration of the report of the Senate Committee Local and Foreign Debts presented by its chairman, Clifford Odia (PDP, Edo).
President Buhari last Thursday sent a letter to the Senate seeking its approval for another batch of external loans to enable the administration fund the revised 2020 budget and execute some critical projects.
However, due to the sketchy details, the Senate withheld its approval until the lawmakers were better informed.
The federal government proposed to use the loans to execute its priority projects and to support state governments in stimulating their economy, which has been adversely hit by the coronavirus pandemic.
In his presentation, Mr Ordia noted that the emergence of COVID-19 has altered the plans and projections of the government as captured in the 2020 budget.
“Such impact has affected the revenue generation plan of the government, leaving it with a larger deficit than envisaged,” he said.
This change in revenue projection and the deficit it is bringing in the implementation of the budget, the lawmaker explained, necessitated the request for more borrowing to finance the budget.
The Senate also on Tuesday approved the Medium Term Expenditure Framework and Fiscal Strategy Paper projections, upon which the revised 2020 budget would be based.
Ibrahim Gobir (APC, Sokoto) argued that without the loan “we cannot move anywhere with the recommendation on the MTEF.”
On his part, Tolu Odebiyi (APC, Ogun) said the loans were needed because the budgetary implementation over time has been low.
“Even at the best of times, we have only done another 50-54 per cent of our budget not to talk of a time like this that we are in crisis.”
Yet, he added, a lot needs to be done with the budget, especially in terms of duplication of expenditure as the country “cannot run away from cutting costs.”
The approved loans are now subject to the concurrence of the House of Representatives, which, on Tuesday, passed the $22.7 billion loan earlier approved by the Senate.
Last month, both Houses approved an ₦850 billion borrowing request made by the President, which is to be sourced from domestic markets “to fund critical capital projects in the 2020 budget.”
Nigeria’s rising debt profile, as of September 30, 2019, was ₦26.2 trillion. Of this amount, total domestic debts is about ₦18 trillion, or 68.45 per cent. About ₦8 trillion are owed to foreign lenders.
The approved $5.513 billion loans are as follows:
$3.4 billion from the International Monetary Fund (IMF) for Rapid Financing Instrument to part-finance FGN 2020 proposed revised budget deficit;
World Bank’s $1.5 billion for the Development Policy Financing to part-finance FGN 2020 revised budget deficit;
$500 million from African Development Bank (AfDB) for COVID-19 crisis response budget support operation to part-finance FGN 2020 revised budget deficit; and
$113 million from Islamic Development Bank (IDB) to part-finance FGN 2020 revised budget deficit.