Buhari seeks senate approval for $5.5bn loan

President Muhammadu Buhari has asked the senate to approve a loan of $5.5 billion to fund the 2017 budget.

Buhari’s request was contained in a letter read by Senate President Bukola Saraki on Tuesday.

The president also said the 2017 budget had a deficit of N2.356 trillion.

“Implementation of the external borrowing plan approved in the 2017 appropriation Act. External borrowing to refinance maturing domestic debts through the issuance of $3 billion Euro bond in the international capital market or through a loan syndication,” the letter read.

“The senate may wish to refer to 2017 appropriation Act which has a deficit of 2.356 trillion and provisions for near borrowings 2.321 trillion. The Act also provides for 1.254 trillion and external borrowing of 1.067 trillion about $3.5 billion. Issuance of $2.5 billion for financing the 2017 appropriation Act.

“The balance of the 2017 external borrowing in the sum of $3.2 billion is planned to be partially sourced in the ICM of $2.5 billion through Eurobonds or a combination of Eurobonds and Diaspora bonds while $700 billion is proposed to be raised from multilateral sources.

“It should be noted that intention is to issue the Eurobonds first with the objective of raising all the funds through Euro bonds and diaspora bonds will only be issued when the full amount cannot be raised through Euro bonds.”

He explained that the federal government planned to substitute domestic debts with “less expensive long-term external debts”.

“In order to reduce debt service levels, and letting tenure profile of debt stock, the FGN seeks to substitute domestic debts with less expensive long-term external debts. The FGN seeks to source $3 billion through the issuance of Eurobonds to the ICM and or loan syndication by banks as approved by the federal executive council,” the letter read.

“It is important to note that the proposed sourcing of $3 billion from external sources to refinance maturing debts will not lead to an increase in public debt profile because debt already exists, rather the substitution of domestic debts with relatively cheaper and long-term external debts will lead to a significant decrease in debt service cost.

“This will also achieve more stability in the debt stock while also creating more borrowing space in the domestic market for the private sector.”