Senate approves Buhari’s $5.513bn external loan request

…Okays revised 2020-2022 MTEF, FSP

Tunde Opalana, Abuja

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 on Tuesday.

Giving a breakdown into 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 precent 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).

COVID-19: Kaduna Govt says markets, places of worship to remain closed till further notice

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.”

Also, the Senate on Tuesday passed the 2020-2022 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) presented by President Muhmmadu Buhari for consideration of Senate.

The approval of the MTEF and FSP was sequel to the presentation of a report by Senate Committee on Finance and consideration of same at plenary.

Chairman of the Committee, Sen. Solomon Adeola (APC-Lagos), while presenting the report said the 2020-2022 MTEF and FSP provided a postscript to the initial publication and update with the revised assumptions and fiscal strategy given current realities posed by COVID-19.

He said following the revision of MTEF and FSP, the 2020 Federal Government’s budget would be amended to reflect the changes articulated.

He said the proposed amended of the budget provided for the COVID-19 Crisis Intervention Fund and other adjustments required due to the decline in international oil prices.

The Senate after presentation of the report and contributions of senators approved the recommendations of the committee.

Some of the recommendations includes that the price of crude oil be increase to 28 dollars per barrel as against the 25 dollars per barrel proposed by the executive in the 2020-2022 MTEF and FSP.

This it said was a result of the recent upward trend of the crude oil market which as today stood at 38 dollars per barrel with a strong expectation that the price will rise to 40 dollars to 45 dollars per barrel.

It also approved that the oil production output be sustained at 1.8 million per barrels day as proposed by the executive as this was the decision of cutting production by OPEC which Nigeria is a member.

It also approved that the deficit of N4.9 trillion on the budget would largely be financed from new borrowings by the federal government.

In a related development, Senate also at plenary approved President Buhari’s external loan request of N5.513 billion to fund the revised 2020 Appropriation Act.

The approval of the request was sequel to the presentation of a report by Sen. Clifford Ordia (PDP-Edo), Chairman Senate Committee on Local and Foreign loan.