Senate has granted President Bola Tinubu’s request to take an external loan of $2.209bn, equivalent to N1.767trn.
The loan would finance part of the N28.7trn 2024 budget, as it was captured in the Appropriation Act of the current fiscal year.
The decision was taken after considering a report of the Senate Committee on Local and Foreign Debts, which its chairman, Aliyu Wamakko, presented during the plenary.
The external loan will be sourced from the country’s Eurobonds in international capital markets and gains from its financial laws.
A Eurobond is a debt instrument denominated in a currency other than the country’s home currency or market in which it is issued.
Eurobonds are important because they help countries or organisations raise capital while allowing them to issue them in another currency.
Tinubu sought approval on Tuesday by the provisions of Sections 21 (1) and 27 (1) of the Debt Management Office and the approval of the Federal Executive Council.
Wamakko, the senator representing Sokoto North Senatorial District, presented the report and explained that if the external borrowing request were approved, it would strengthen the nation’s foreign reserve.
The senator said members of the National Assembly would collaborate with the Ministry of Finance to ensure that the Fund is appropriately utilized when it is finally sourced.
Wamakko said the loan will be sourced through Eurobonds in the International Capital Market, the issuance of debut sovereign Sukuk in the International Capital Market, with a Guarantee from the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC), and Bridge Finance/Syndicated Loans.
The senator said the loan will be at the official exchange rate of $1.00/N1,640 for implementing capital projects as contained in the 2024 budget.
The committee chairman said the federal government needed the funds to complete ongoing implementation projects and programmes within the budget.
In addition to completing ongoing projects, Wamakko said the bonds’ issuance will contribute to implementing the Debt Management Strategy.
He said this seeks to reduce the cost of borrowing, lengthen the public debt stock’s maturity, free up domestic market space for other borrowers, and help increase Nigeria’s external reserves.
Therefore, the chairman recommended that the bond be approved so that the Federal Government could settle outstanding claims and liabilities.
Depending on the tenor of the Eurobonds to be issued and market conditions at the issuance, the funds are expected to be raised at Coupons of a reasonable percentage per annum, much lower than the federal government’s domestic borrowing rates per annum.
Wamakko said members of his Committee observed that the country could raise all or part of the $2.209bn through the issuance of Eurobonds.
The committee chairman added that Nigeria has been a regular issuer in the International Capital Market and has raised $16.92 billion, out of which $15.12 billion is outstanding.
He also said that if the issuance of the Eurobonds is delayed due to market conditions, the Nigerian government will resort to Bridge finance/syndicated loans.
There was no debate on the request after Wamakko’s presentation because it had already been captured in the 2024 Appropriation Act, and the Deputy Senate President, Barau Jibrin, did not waste time putting it to a voice vote.
Barau noted that the President’s request was straightforward and that there would be no need for an extensive debate.
He also said the external borrowing request was in the country’s interest.
Jibrin, after that, appreciated the committee members for the recommendations.