President Muhammadu Buhari has written to the National Assembly asking them to approve a foreign loan of $29.960 billion to address infrastructure deficit in the country.

The amount, which is under the government’s External Borrowing Plan, is to be spent on power, railway, roads, education, health, water resources among others.

The request was sent via a letter the president sent to the Senate President Bukola Saraki and Speaker of the House of Representatives Yakubu Dogara.

The letter was read at plenary in the House of Representatives yesterday but it was yet to be read in the Senate.
The money is made up of projects and programmes loan of $11.274 billion; Special National Infrastructure projects $10.686 billion; Euro Bonds of $4.5 billion and Federal Government Budget Support of $3.5 billion.

“Considering the huge infrastructure deficit currently being experienced in the country and the enormous financial resources required to fill the gap in the face of dwindling resources and the inability of our annual budgetary provisions to bridge the infrastructure deficit, it has become necessary to resort to prudent external borrowing to bridge the financing gap,” he said.

The president added that the World Bank had provided a loan of $125 million to the FG to procure vaccines and other ancillary facilities to stop polio, and also provided $450 million to assist in the reconstruction and rehabilitation of the Northeast.

He said some of the borrowed funds would be allocated to the Northeast to cater for polio eradication and routine immunization, $125m; community and social development project, $75m; Nigeria States Health Programme Investment Project, $125m; State Education Programme Investment Project, $100m; Nigeria Youth Employment and Social Support Project, $100m and Fadama III Project, $50m.

Buhari said because of the emergency situation in the Northeast region, “it has become inevitable to request for the NASS leadership approval pending the consideration and approval of the 2016-2018 borrowing plan by the National Assembly to enable us disburse these funds immediately.”

Efforts to get more details of the sources of the loans from the ministry of finance proved abortive but when contacted, the Media Adviser to the Minister, of Budget and National Planning, James Akpandem, told Daily Trust on phone that it was only when loans were sourced that the Ministry would consider the receipts for allocation in the annual budget.

“This particular loan you are talking about, I don’t have details about it,” Akpandem said about the $29 billion dollars loan being sought for by the federal government.

He said the federal government had the right to decide whether or not to take a loan and the Ministry of Budget and National Planning would factor the funds into relevant projects.

“If the President says Nigeria is going to source for loans and it is going to be a component of the budget, it would have been in our position to talk about it,” he said.

Revenue Commission welcomes loan plan
Reacting on the loans request, the acting Chairman of the Revenue Mobilisation Allocation and Fiscal Commission, Shattima Umar Abba Gana praised President Buhari for his foresight in seeking the loans to embark on the developmental projects.

He said the government did the right thing, because Nigeria had one of the lowest debts to GDP ratio in the continent.

Experts react
Experts are of the view that if the new debts will be judiciously used on capital projects, the FG can go ahead and borrow.
But they oppose any plan to use the loan for recurrent expenditure. “That’s where the monumental drain/waste goes on feeding fat ‎ the deep greed and graft in the public service” Mr. Basil Jev, a public commentator said.
Mr. Moses Azege, a financial analyst based in Abuja said the moratorium on debts could be good, but pointed out that it was also tricky as its expiry could signal austerity if government’s revenue base remained same.

Mr. Rislanudeen Muhammad, the former Acting Managing Director/CEO, said: “It is important to note that Nigerian government today does not have any option of financing its budget other than through borrowing.

“Indeed, the 2016 budget itself was premised on deficit financing to the tune of N2.2 trillion out of which N1.8 trillion was for capital expenditure.

“In a period of recession … the best way to pull ourselves out of it is by way of reflating the economy through massive investment in infrastructure, power, housing etc with multiplier implication of increasing employment and jump starting the micro economy.

“To that extent, the budget was rightly structured to deal with that challenge of stagflation and recession.
“However, we need to be careful in ensuring we borrow for capital expenditure only, on projects that will generate growth and support repayment of the loan. We should not borrow for consumption.

“Notwithstanding our estimated debt to GDP ratio of about 14 percent which is low for an emerging economy like Nigeria, our current debt profile of about N16.3 trillion is already becoming a source of concern due in large part to our dwindling revenue especially from oil” he explained.

“At the IMF/world Bank annual meetings early this month, an IMF Director cautioned against over borrowing as about 45 percent of our estimated revenue is currently being used to service existing debt which is also further compounded by rising inflation rate.

“We have no option than borrowing at this time but we must do it with caution to ensure optimality in both borrowing as well as our spending pattern” he cautioned.

Don’t borrow above $22.08bn in 2017 – DMO

The Debt Management Office (DMO) has advised the Federal Government not to borrow above 22.08 billion dollars in 2017.

DMO gave the recommendation in its 2016 Debt Sustainability Analysis (DSA) report, obtained by the News Agency of Nigeria.

In the report, DMO stated that the end-period on Net Present Value (NPV) of the Total Public Debt-to-GDP ratio for 2016 for the Federal Government was projected at 13.5 per cent.

“The maximum amount that can be borrowed (domestic and external) by the Federal Government of Nigeria in 2017, without violating the country-specific threshold, will be 22.08 billion dollars (i.e. 5.89 per cent of 374.95 billion dollars).”