Unknown terms: Reps approve $5.8bn infrastructure loan request
…As Nigeria’s public debts rise to N38trn in Q3
…FG needs to cut expenditure, reduce cost of governance — Former LCCI DG
.Abimbola Abatta, Ogaga Ariemu and Uthman Salami
The House of Representatives, on Tuesday, approved President Muhammadu Buhari’s infrastructure loan request of $5.8 billion and grant of $10 million without knowledge of the terms and conditions of the loan.
The Senate in July this year had approved $8.3 billion (N8,325,536,537) loan request by President Muhammadu Buhari as part of the 2018 – 2020 external borrowing (rolling) plan of the federal government.
They lawmakers also approved a separate €490 million loan request by the president.
President Muhammadu Buhari had in May, asked the National Assembly to approve the loan.
The approval of the loan, he said, would enable projects listed under the 2018-2020 External Borrowing Plan to be financed through sovereign loans from the World Bank, African Development Bank (AfDB), French Development Agency (AFD), Islamic Development Bank, China EXIMBank, China Development Bank, European Investment Bank, European ECA, KfW, lPEX, AFC, India EximBank and International Fund for Agricultural Development (IFAD).
The approval by the House of Representatives is coming amid Nigeria’s rising debt profile which has continued to trigger debates in the public domain.
A statement published by the Debt Management Office (DMO) on Tuesday revealed that Nigeria’s total public debt hits N38trillion in the third quarter of the year.
The DMO further disclosed that the $4 billion Eurobonds issued by the government in September largely accounted for the N2.540 trillion increase when compared to the corresponding figure of N35.465 trillion at the end of Q2 2021.
According to the DMO, “The issuance of the $4 billion Eurobonds has brought significant benefits to the economy by increasing the level of Nigeria’s External Reserves, thereby supporting the Naira Exchange Rate and providing necessary capital to enable the Federal Government finance various projects in the Budget.
“The triple tranche $4 billion Eurobond, issued in September 2021, was for the implementation of the New External Borrowing of $6.18 billion in the 2021 Appropriation Act.”
Meanwhile, in approving the loan, the House asked that the terms and conditions from the funding agencies should be forwarded to the National Assembly for proper execution and commendation.
The House Committee on Aids, Loans and Debt Management, had presented its report through the Chairman, Ahmed Safana (APC-Katsina).
Safana observed that the $5.8 billion loan covers $2.3 billion for the Grid Modernisation and Expansion Programme, $290,000,000 for the malaria project, $700,000,000 for the Sustainable Water Supply, Sanitation and Hygiene (WASH) Project, $786,382,967 for the Gurara Phase II project among several others.
“That the House do consider Final Report of the Committee on Aids, Loans and Debt Management on the Proposed 2018–2020 External Borrowing (Rolling) Plan No.3 (Laid:14/12/2021) – Committee of Supply,” Safana said.
“That the House do approve the under listed ongoing negotiation of external borrowing of $5,803,364,553.50 and a Grant component of $10,000,000 under the 2018-2020 External Borrowing (Rolling) plan.”
The loan is part of the Federal Government’s 2018-2020 external borrowing plan.
Recall Nigerian NewsDirect earlier reported that the President of the Senate, Senator Ahmed Lawan had debunked the insinuation that the 9th Assembly was not a rubber stamp to the Executive arm led by President Muhammadu Buhari.
Meanwhile, a related development, a World Bank report placed Nigeria among the top 10 countries with the highest debt risk exposure. Nigeria is fifth with $11.7 billion debt exposure, behind India ($22 billion), Bangladesh ($18.1 billion), Pakistan ($16.4 billion), and Vietnam ($14.1 billion).
FG needs to cut expenditure, reduce cost of governance – Former LCCI DG
Reacting to the development in an interview with Nigerian NewDirect, the CEO, Centre for promotion of Private Enterprise (CPPE) and former Director General, Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf said there is a need for political will to downsize cost of governance and ease the fiscal burden on government.
Dr Muda advised that federal government should embark on more concession and privatisation at all levels of government.
He further noted that the emphasis should be on concessionary financing as opposed to commercial debts which are typically very costly.
According to him, “The rising debt profile of government raises serious sustainability concerns. Although government tends to argue that the condition is not a debt problem, but a revenue challenge. But the truth is that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably. It invariably becomes a debt problem.
“What is needed is the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost and ease the fiscal burden on government.
“It is important to ensure that the debt is used strictly to fund capital projects that would strengthen the productive capacity of the economy. This is position of the Fiscal Responsibility Act.
“Additionally, emphasis should be on concessionary financing, as opposed to commercial debts which are typically very costly.
“It is imperative for the country to operate as a true federation which it claims to be. The unitary character of the country is making it difficult to unlock the economic potentials of the subnationals. It is perpetuating the culture of dependence on the federal government.
“It is necessary to scale down the size of government and cost of governance. Fiscal sustainability is driven by both cost and revenue.
“Therefore managing the major drivers of cost and revenue is imperative. As far as possible, the government should pushback in sectors or activity areas where the private sector has capacity to deliver desired outcomes,” he stated.
