By Haruna Salami
President Muhammadu Buhari has requested approval of the Senate for external loans totalling $5.513 billion to finance 2020 revised budget.
According to Buhari’s letter to the President of the Senate, the amount is expected to finance the proposed revised 2020 budget; implementation of priority projects of the Federal Government; and projects to support the State Government.
According to him, the request by the Executive arm of Government is “in accordance with the provisions of Section 21 of the Debt Management office Establishment Act 2003, and Section 41 of the Fiscal Responsibility Act 2007.
“As the Senate may be aware, the COVID-19 pandemic has resulted in economic and fiscal challenges for many countries. Nigeria has also being affected in this regard, especially with the lower demand for crude oil which has affected our sales, and the sharp decline in the price of oil below $25 USD per barrel, which is much lower than the $57 per barrel benchmark in the 2020 Appropriation Act.
“The COVID-19 pandemic has also created the need for additional expenditure in the health sector. All of these have necessitated the review of the 2020 budget and the Medium Term Expenditure Framework 2020-2022.
“Following from paragraph 2, the draft revised budget proposed by the Executive for 2020 has a higher deficit. In order to finance this deficit, the Federal Government is planning to raise funds from both domestic and external sources.
“For the External component, the government is negotiating with multi-lateral institutions for funding on concessionary terms. The facilities totaling $5.513 billion being arranged in this regards.
The President explained further that the proposed external loans to finance revised 2020 budget deficit are from the International Monetary Funds (IMF) $3.4 billion; World Bank, $1.5 billion; African Development Bank, $500 million; and Islamic Development Bank $113 million.
“In addition to the financing required for the revised 2020 budget, financing is also required for some priority projects of the federal government to address the COVID-19 pandemic and improve Nigeria’s food security”, President Buhari explained.
Giving a breakdown on how the $5.513 loan would be applied, Buhari disclosed that the proposed $600 million loan from the Islamic Development bank would be used to fund projects to support of Nigeria’s response to challenges caused by COVID-19; while the sum $125 million from the African Development Bank would be used for strengthening of Healthcare system to improve response to COVID-19.
He added that Financing Small Farmers to mitigate food security impact of COVID-19 would cost $23 million; while $500 million from the African Export Import Bank would be used for the Provision of critical medical supplies to combat COVID-19.
On a proposed loan of €995 million loan from the Export Import Bank of Brazil, he stated that the amount would be used to enhance mechanization of Agriculture and Agro-processing in Nigeria.
“The Islamic Development Bank has indicated that only $113 million of financing will be available to the Federal Government of Nigeria in the 2020 fiscal year to enhance the government’s COVID-19 response, which will come from restructuring of previously approved but inactive facilities for Nigeria,” the President added.
He further disclosed that a loan request to the World bank between $500 and $750 million would be used to fund State fiscal transparency, accountability and sustainability Programme; and to implement COVID-19 Action Recovery and Economic Stimulus Programme to support state level efforts to protect livelihoods, ensure food security and stimulate economic activity.
The President’s request for $5.513 loan was referred by the Senate President, Ahmad Lawan, to the Committee on Local and Foreign Debts which is expected to report back to the upper chamber during plenary next Tuesday.