Senate Approves Buhari’s $5.513bn External Borrowing Request

The Senate has approved President Muhammadu Buhari’s $5.513 (Five Billion, Five Hundred and Thirteen Million United States Dollars) external borrowing request.

The approval came following consideration and adoption of the report of the Senate Committee on Local and Foreign Debts.

Giving a breakdown of the sources of the loan request, Chairman of the Committee, Senator Clifford Ordia (PDP – Edo Central) said the federal government would source $3,400,000,000 at one percent interest rate from the International Monetary Fund (IMF) for Rapid Financing Instrument to part finance the 2020 proposed revised budget.

According to the lawmaker, the federal government would also source the sum of $1,500,000,000 from the World Bank for Development Policy Financing of the revised 2020 budget at 2.38 percent interest rate; and another $500,000,000 from the African Development Bank (AfDB) for COVID-19 crises response budget support operation to finance revised budget deficit at 1.315 percent interest rate.

The Islamic Development Bank (IsDB) is also expected to give a loan of $113,000,000 to the Federal Government of Nigeria to part finance the 2020 revised budget deficit at 0.4 percent interest rate.

The Committee in its report noted that revenue projections contained in the Appropriation Act of 2020 was adversely impacted by revenue shortfalls due to the COVID-19 pandemic.

It further observed that same led to dwindling Government revenue from oil sales as well as sharp drop in global oil prices below $20 (USD).

The committee noted that as a consequence, the federal government found it expedient to seek amendment to the Appropriation Act of 2020 as well as review the 2020-2022 Medium Term Expenditure Framework (MTEF).

According to the report, “the Appropriation Act (Amendment) Bill 2020 contains a revised total budget of N10.594 trillion with a deficit of N4.563 trillion which will be part financed by proposed domestic borrowing of N2.188 trillion and external borrowing of N1.984 trillion.”

The Committee, however, added that the first component of the request of the President to seek the approval of the Senate to embark on external borrowing to the tune of $5.513 billion was to facilitate the financing of the revised 2020 budget deficit.

The Committee stressed that the budget deficit request of the President is aimed at bridging the revenue shortfalls for the 2020 fiscal year and to access immediate funds required to deal expeditiously and decisively with the ravaging impact of the COVID-19 pandemic.

The report further stated that the Local and Foreign Debts Committee, in agreement with the attending Ministries, Departments and Agencies of Government, agreed to “conclude the consideration of the other two outstanding components of Mr. President’s External Borrowing request relating to Funding of Priority Projects of the Federal Government to be captured in the Budget estimates for 2021 and Facilities to support State Government to face the challenges of the COVID-19 pandemic.”

In a related development, the Senate also on Tuesday passed the amended 2020-2022 Medium Term Expenditure Framework/Fiscal Strategy Paper.

The passage came following consideration and adoption of the recommendations of the Senate Committee on Finance.

Chairman of the Committee, Senator Olamilekan Adeola (APC Lagos West), in his presentation disclosed that as at March 2020, the Federal Government’s retained revenue was N950.56 billion, out of which N464.03 billion was from oil revenue.

The lawmaker stated that the sum of N129.72 billion and N42.23 billion made up amounts from Company Income Tax (CIT) and Value Added Tax (VAT); while Customs collection was N97.47 billion.

Accordingly, the Senate while adopting the Committee’s recommendations increased the price of crude oil to $28 per barrel as against the $25 per barrel proposed by the Executive.

The upper chamber also reviewed oil production output from 1.9 million barrel per day (mbpd) proposed by the Executive arm of government to 1.8 mbpd.

Retaining the exchange rate of N360/US$1 as proposed in the MTEF amendment, the Senate resolved that the sum of N500 billion intervention fund drawn from various accounts, for the purpose of funding projects already added to the proposed revised 2020 budget be sent to the National Assembly for approval.

The Senate further maintained that the deficit of N4.95 trillion be financed from new borrowings estimated at N4.17 trillion, while expecting that N1.98 trillion of the new borrowings will be from external concessional sources.

It gave the external multilateral sources as mainly the International Monetary Fund, World Bank, African Development Bank and Islamic Development Bank.

The Senate while retaining the Federal Government’s reduction of budgeted revenue figure for Customs from N1.5 trillion to N950 billion, resolved that the the Federal Government portion of N360 billion from first line NNPC deductions go straight to the revenue coffers for funding of the 2020 amended budget.

The upper chamber also resolved that the non-oil revenue which include the Capital Gaines Tax, Stamp Duty and Company Income Tax be sustained as contained in the proposed MTEF/FSP amendment with serious supervision with a view to blocking revenue leakages.