President Bola Tinubu has written to the National Assembly, seeking the approval of parliament for a new external borrowing of USD2,209,512,902.22.
President Tinubu, in two separate letters to the President of the Senate, Godswill Akpabio and the Speaker of the House of Representatives, Tajudeen Abbas, said the external borrowing plan, which is already captured in the 2024 Appropriation Act, is to fund the deficit in the budget.
He explained that the loan would be raised from one or more sources, including the issuance of Eurobonds in the ICM, issuance of debut Sovereign Sukuk, among others.
According to the President, the new loans are needed to fund ongoing projects and programmes contained in the 2024 Appropriation Act, “which were designed to stabilize the economy and put it on the path of sustainable growth and development.”
He added that the funds would be deployed towards priority sectors of the economy, including power, transport, agriculture, defence and security, amongst others.
The President’s letter entitled “the implementation of the new external borrowing of N1,767,610,321,779.00 (about USD2.209 BILLION) in the 2024 Appropriation Act,” was read this morning at plenary in both chambers of the National Assembly.
“In accordance with the provisions of Sections 21(1) and 27(1) of the Debt Management Office (DMO) (Establishment, Etc.) Act, 2003, and the approval of the Federal Executive Council, I write to request for a Resolution of the National Assembly (NASS) to raise the sum of N1,767,610,321,779.00 (equivalent of USD2,209,512,902.22 at the Budget Exchange Rate of USD1.00/N800) provided as New External Borrowing in the 2024 Appropriation Act to part finance the budget deficit of N9.179 trillion,” the president’s letter read, in part.
“The 2024 Appropriation Act approved the sum of N7,828,529,477,860.00 as New Borrowings to part-finance the 2024 budget deficit of N9.179 trillion. The total New Borrowings of N7.828 trillion was further subdivided into New Domestic Borrowing of N6.061 trillion and New External Borrowing of N1.767 trillion.The latter is the subject of this request.
“The plan is to raise the New External Borrowing of USD2.21 billion from a combination of commercial sources: Issuance of Eurobonds, Issuance of debut Sovereign Sukuk in the International Capital Market (ICM) and Bridge Finance/Syndicated Loans
“Nigeria could raise all or part of the New External Borrowing of USD2.21 billion through the issuance of Eurobonds in the ICM. Nigeria has been a regular issuer in the ICM and had raised USD16.92 billion out of which USD15.12 billion is outstanding. The ICM is now open to countries similar to Nigeria, and so far, Cote d’Ivoire, Benin, Kenya, and Cameroon have issued Eurobonds in the ICM in 2024.
“A debut Sovereign Sukuk of up to USD500 million in the ICM with credit enhancement from the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC), a member of the IsDB Group, subject to the terms and conditions.
“Bridge Finance/Syndicated Loans by the International Bookrunners/Joint Lead Managers (Citigroup Global Markets Ltd, Goldman Sachs, JP Morgan and Standard Chartered) that have been appointed through an Open Competitive Bid to advise on the Issuance of Eurobonds, where it becomes necessary.
“This option will only be used if for any reason the Issuance of Eurobonds is delayed due to market conditions and there is an urgent need for funds. Please note that the precedent for accessing Bridge Finance/Syndicated Loan is that the proceeds of the Eurobonds will be used to offset the loan.”
President Tinubu said that “all the options will be pursued simultaneously for the capital raising of USD2.21 billion considering the costs, relative benefits, and timing of each of them to the country. However, emphasis will be on the Issuance of Eurobonds (Option 1) which is typically faster to conclude. Additionally, a larger amount can be raised through Eurobonds at a relatively lower cost.”
“Because all the options are market related, the Final Terms and Conditions (Interest Rate and Tenors) can only be determined at the point of Issuance of the Eurobonds and Sukuk, and negotiation with lenders in the case of Bridge Finance/Syndicated Loan,” the president stressed.
“They will all be subject to market conditions prevailing at that time. The Federal Ministry of Finance and the Debt Management Office, working with the Transaction Advisers appointed by the Federal Government through Open Competitive Bidding, will ensure that Nigeria secures the best Terms and Conditions within the context of the market.”
Tinubu emphasized that “the Resolution of the NASS is required to comply with the provisions of the DMO Act and implement the New External Borrowing of N1,767,610,321,779.00 (equivalent of USD2,209,512,902.22 at the Budget Exchange Rate of USD1.00/N800) in the 2024 Appropriation Act to part finance the budget deficit.”
“In view of the foregoing, especially with respect to the provisions of Sections 21 (1) and 27 (1) of the DMO Act, a specific Resolution of the NASS is required to implement the New External Borrowing in the 2024 Appropriation Act,” the president surmised.
