NIGERIA’S senate has approved President Muhammadu Buhari’s N2.34trn ($5.68bn) loan request to help fund the 2021 budget in recognition of the fact that the coronavirus pandemic has made it impossible for the government to generate revenue itself.
Effectively a mono-economy, Nigeria is wholly dependent on the receipt of petroleum exports to fund her economy as they account for about 95% of government revenue. However, due to the coronavirus pandemic, not only have exports dropped drastically but the price of crude oil also fell below the benchmark price of $57 a barrel set for the 2020 budget at one stage.
With no signs on things getting better, government ministers decided to resort to borrowing to fund the 2021 budget. This year, Nigeria is working on a N12.6trn ($32.4bn) annual budget, of which N4.28trn ($11bn) have been met by loans, mainly from global lenders like the World Bank and International Monetary Fund.
Today, the senate approved President Buhari’s loan request N2.34trn to help fund the N13trn 2021 budget following the approval of its Committee on Local and Foreign Loans chaired by Senator Clifford Ordia. In its submission, the committee recommended that the senate approves President Buhari’s request for the issuance of $3bn but not more than $6.18bn Eurobond in the International Capital Market.
External borrowing of N2.34bn 3, according to the panel, should be for the financing of part of the deficit authorised in the 2021 Appropriation Act. In addition, the committee also recommended that the senate should approve that the amount authorised may be raised from multiple sources such as the International Capital Market and any other multilateral or bilateral sources as may be available.
It also recommended that the senate directs the ministers of finance and national planning and the director-general of the Debt Management Office, as well as the governor the Central Bank of Nigeria to submit to the National Assembly within 10 working days, a letter containing the US dollar amount so raised and received as a result of the above approval. They are also to reveal the applicable exchange rate.