FG’s Unending Loan Requests

Despite the nation’s rising debt profile, the Senate, last week, approved the federal government’s request for another $1.5bn, €995m external loans, reports Udora Orizu

On April 21, the Senate gave the federal government the nod to borrow a total of $2.7 billion out of the $5.5 billion external borrowing request sent to the National Assembly by President Muhammadu Buhari in May, 2020.

Buhari had last May requested the Senate to approve the external borrowing to finance various priority projects of the federal government and to support the state governments facing fiscal challenges.

Over the years, given the country’s rising debt profile, Nigerians always express concerns whenever they hear that the government is seeking one loan or another. Nigeria, under President Muhammadu Buhari, is currently on a borrowing spree.

Since the current administration came into power in May 2015, its mantra, apart from its characteristic blame game of past administrations, seems to be that of borrowing. The question on the mind of the average Nigerian is what does successive governments do with the previous borrowings? Does government have any developmental landmarks to show for these huge debts accumulated over the decades?

As at March 2020, the Senate put Nigeria’s total debt profile at N33 trillion after its approval of $2.7 billion foreign loan for the federal Government last week.

This is just as the Director-General of the Debt Management Office (DMO), Mrs. Patience Oniha, expressed concern that economic effects of the Coronavirus pandemic may incapacitate the country from effectively servicing the debt.

Figures emerging from the DMO indicate that as of December 2019, the federal government’s domestic debt stood at N14.2 trillion, while external debt was $27,676.14 (N10 trillion). DMO said in addition to that, between January and December 2019, the federal government paid N480.4 billion on servicing external debts.

If this recent $2.7 billion loans are accessed, it will jerk up Nigeria’s total public debt. The role of the National Assembly in this borrowing spree has compounded the problem. The 9th National Assembly, which has been tagged as a rubber stamp of the executive has been playing true to this description.

The Senate’s approval of President Muhammadu Buhari’s $2.79 billion external borrowing request on March 5, 2020 stirred the hornet’s nest especially, among the Southeast caucus of the Ninth National Assembly that faulted the non-inclusion of Southeast zone among the zones to benefit from the 34 infrastructure projects to be executed with the loan.

A lot of protests and grievances also trailed the loan approval by the upper chamber with the public and the main opposition party, the Peoples Democratic Party (PDP), faulting it.

President Buhari had on November 28, 2019 forwarded a request to the National Assembly to reconsider and approve the federal government’s 2016 to 2018 external borrowing plan to help Nigeria finance the capital components of the 2020 budget. The loan if approved, he said, would be used to execute key infrastructure projects across the country.

The President had sent the same request to the Eighth Senate under Bukola Saraki in 2016 wherein he requested for about $30 billion. The then lawmakers, however, rejected the request as majority voted against it when it was brought for consideration.

The President, in the November 28, 2019 letter to the Ninth Senate led by Ahmad Lawan, explained that the external borrowing plan target-projects cut across all sectors.

According to the document accompanying the President’s request, the loan would be spread across many financial institutions. Over 70 per cent of the loan would come from the Exim Bank of China, while the remaining funds will come from the World Bank and Africa Development Bank, among others.

The breakdown is as follows: Exim Bank of China ($17bn), World Bank ($2.95bn), Africa Development Bank ($1.88bn), Islamic Development Bank ($110m), Japan International Cooperation Agency ($200m), German Development Bank ($20m) and French Development Agency ($480m).

The Senate’s approval of the loan on March 5, was however not without protests from the PDP Senators with Senate President Lawan and the Minority Leader, Senator Eyinaya Abaribe being locked in bitter altercations over the whole procedure.

Chairman of the Senate Committee on Local and Foreign Loans, Senator Clifford Ordia, had barely laid the report and was about to read the executive summary, when Senator Adamu Aliero asked the Senate President to postpone deliberation on the document to enable them study the report.

Lawan rejected the suggestion warning that the report may have become a public debate before last week, because the press would definitely get copies and publish the contents.

“According to Senate rules, the report should not be subjected to line by line consideration. We are not doing second reading on this. We have recommendations which we will vote on but before we reach that stage, what is here is what is to finance our capital budget,” the Senate President said.

Abaribe was, however, quick to fault the position of the Senate President saying, “The position is that we would now approve some of this. It is when we get to the point of looking at each one of them that we will now determine which of these projects will help in growing our economy. Now that you have said we will take it line by line.

“We are going to pass a loan approval of $22.7bn and we, who are going to pay back that are making efforts to make sure this is clarified and Mr. President, you are not giving us the privilege to make our points known and come across. We don’t see anything that is so difficult for us.”

The Senators eventually approved the loan request, when they emerged from the closed-door session that lasted for over three hours.

It, however, took the Southeast caucus of the National Assembly one whole week to express their reservations on the loan.

The lawmakers made up of Senators and House members from the zone met after last Thursday’s plenary in the office of Abaribe and resolved to separately meet with the leadership of both the Senate and House over the loan request approved by the Senate.

Immediate past Deputy Senate President, Senator Ike Ekweremadu, who is the Leader of the Southeast caucus in the National Assembly led the ‘protesting’ Southeast legislators to the meeting that lasted about three hours.

Ekweremadu, who briefed the press after the meeting with Lawan and Gbajabiamila, in company withAbaribe, Deputy Minority Leader, House of Representatives, Hon. Toby Okechukwu; Deputy Whip and House of Representatives, Hon. Nkiru Onyejeocha, among others gave a synopsis of the loan.

Again in June 2020, the Senate approved the $5,513,000,000 external loan request submitted to it by Buhari. The President of the Senate, Ahmad Lawan, who read the covering letter that accompanied the loan request, had asked the Committee on Local and Foreign Debts to work on the document.

Buhari had said the loan request would enable his government to fund the revised 2020 budget following the dwindling oil revenue occasioned by the effects of the COVID-19 pandemic.

The Chairman of the Senate Committee on Local and Foreign Debts, Senator Clifford Ordia, read the report of his panel, which was approved by the Senate. The loan would be sourced from multilateral and bilateral institutions.

Approving Half the Request

The Senate, last week, gave the federal government the nod to borrow a total of $2.7 billion out of the $5.5 billion external borrowing request. The external loans comprise $1.5 billion, to be sourced from the World Bank, and €995 million ($1.2 billion) from other international agencies, for the federal and state governments. Of this, 37.82 per cent was external, while the balance of 62.18 per cent was domestic.

The approval for the external borrowing, followed the consideration and adoption of a report of the Senate Committee on Local and Foreign Debts, chaired by Senator Ordia at the plenary.

Ordia, while presenting the report, said $1.5 billion would be sourced from the World Bank to finance projects of state governments facing fiscal challenges arising from the COVID-19 pandemic, while the €995 million would be sourced from other multilateral and bilateral global lenders.

The tenor/moratorium of the loan to be sought from the World Bank is 25 years at an interest rate of 2.45 per cent per annum; while that from the Export-Import Bank of Brazil is for 15 years at an interest rate of 2.935 per cent; and the loan request from the Deutsche Bank of Germany for seven years at a 2.87 per cent interest rate. The lenders, according to him, have proven track record of previous financial accommodation and support to Nigeria.

Ordia said the loan for the states would be used to fund projects under the States’ Fiscal Transparency, Accountability and Sustainability (SFTAS) programme and COVID-19 Action recovery and economic stimulus programme to support state-level efforts to protect livelihoods, ensure food security and stimulate economic activity (N-CARES).

He stated that the interventions would target existing and newly vulnerable and poor households, farmers, Micro and Small Enterprises (MSEs) affected by the economic crises caused by the pandemic.

According to him, the €995 million to be sourced from the Export-Import Bank of Brazil (€671, 000,00) and Deutsche Bank of Germany (€324,000,000) is to finance the federal government’s Green Imperative Project to enhance mechanisation of agriculture and agro process in Nigeria to improve food security.

He said the $750,000,000 for States Fiscal Transparency, Accountability and Sustainability programme would be sourced from the World Bank, while the $750,000,000 COVID-19 Action recovery and economic stimulus programme to support states’ efforts at protecting livelihoods and ensuring food security, would also be sourced from the World Bank.

Ordia said the borrowings were concessional loans with low interest rates and a reasonable moratorium and payback period. He added that each state is entitled to access a $20,000,000 grant under the programme provided that it achieves a minimum of four disbursement linked indicators while the PCT is entitled to $15,000,000.

He said: “The committee most importantly notes that the indicative terms and conditions under which the loan will be borrowed, there are no unusual or onerous conditions attached and the terms do not in any manner compromise the sustainability of the Nigerian economy or impugn the integrity and independence of Nigeria as a sovereign nation.”

In his contribution, Senator Solomon Olamilekan (APC, Lagos West) said going ahead to approve the loan request would demonstrate the proactiveness by the National Assembly to insulate the economy from a possible decline.

Deputy President of the Senate, Senator Ovie Omo-Agege (APC, Delta Central) sought to know if the committee in coming up with its recommendations was privy to the terms and conditions of the loan agreement.

Lawan, however, advised the committee to liaise with the Debt Management Office for updates on the total loans accessed by the federal government.

Buhari, in a letter dated May 19, 2020, had sought the approval of the National Assembly to secure a foreign loan totalling $5.513 billion to finance deficits contained in the 2020 budget.

He said the loan would be sourced from the International Monetary Fund, World Bank, African Development Bank, Export, Import Bank of Brazil and the African Export, Import Bank.

According to him, out of the total $5.513 billion loan request, $3.4 billion would be sourced from the International Monetary Fund; $1.5 billion from the World Bank; $500 million from the African Development Bank and $113 million from the Islamic Development Bank.