Senate refers $5.5bn loan request to committee

Remigio Civitarese
Ottobre 13, 2017

The senate on Thursday begun consideration of the approval of the $5.5 billion loan request of President Muhammadu Buhari.

President Buhari's request was contained in a letter read on the floor of the Upper Chamber by the Senate President, Dr Bukola Saraki.

Justifying the loan request, Buhari, in the letter, said the $3 billion being sought from the global capital market (ICM) would be deployed to refinance maturing domestic debt to achieve more stability in the country's debt stock and create more borrowing space in the domestic market for the private sector.

He further explained that the proceeds from the proposed issuance of eurobonds and diaspora bond in the global capital market would be used to finance the deficit in the 2017 Appropriation Act and provide funding for capital in the budget. "External borrowing to refinance maturing domestic debts through the issuance of $3 billion Euro bond in the global capital market or through a loan syndication", the letter read.

In the letter, the president explained that the proposed sourcing of $3 billion from external sources to refinance maturing debts would not lead to an increase in public debt profile‎. The Act also provides for 1.254 trillion and external borrowing of 1.067 trillion about $3.5 billion.

The 2017 budget has a deficit of N2.356 trillion and some financial experts are already expressing worry over the country's increasing debt stock and advised the government to inject the billions of naira recovered from looters of the economy to fund the budget deficit instead of resorting to foreign loans.

Meanwhile, the Senate on Tuesday approved the N152bn budget of the Federal Inland Revenue Service for 2017.

According to him, the substitution of Domestic Debt with relatively cheaper and long-term external debt will lead to a significant decrease in Debt Service Cost, just as he said that government's moves in re-financing of Domestic Debt through External Debt would also achieve more stability in the Debt Stock, adding that it would create more borrowing space in the domestic market for the private sector. These coupons were based on the prevailing market conditions at the respective times. "Issuance of Eurobond in the ICM and/or loan syndication by banks in the sum of USD3.0 billion for re-financing of maturing domestic debt obligations of the FGN".

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