OrderPaperToday – The Senate has approved loans to the sum of $2.6 billion out of the $5.5 billion external borrowing request sent to the National Assembly by President Muhammadu Buhari in May last year.
This approval is despite worries by many analysts and citizens on the mounting public debt profile of the country.
The approval came on Wednesday, after the Upper Chamber considered a report by the Committee on Local and Foreign Debts during plenary.
The approved sum, according to the Chairman of the Local and Foreign Debt Committee, Clifford Ordia (PDP, Edo Central), would see €995 million going to finance priority projects of the federal government, while $1.5 billion would be disbursed to the thirty-six state governments to finance critical projects.
Out of the total sum approved, $1.5 billion is to be sourced from the World Bank; €671 million from the Export-Import Bank of Brazil; and another €324 million from the Deutsche Bank of Germany.
The tenor/moratorium of the loans to be sought from the World Bank is 25 years at an interest rate of 2.45 percent per annum; while that from the Export-Import Bank of Brazil is for 15 years at an interest rate of 2.935 percent; and the loans request from the Deutsche Bank of Germany for seven (7) years at 2.87 percent interest rate.
President Buhari, had in a letter dated May 19, 2020, sought the approval of the National Assembly to secure a foreign loans to the tune of $5.513 billion to finance deficits contained in the 2020 budget.
He explained that the loan would be sourced from the International Monetary Fund, World Bank, African Development Bank, Export, Import Bank of Brazil and the African Export, Import Bank.
According to President Buhari, out of the total $5.513 billion (USD) loan request, the sum of $3.4 billion (USD) would be sourced from the International Monetary Fund; $1.5 billion (USD) from the World Bank; $500 million (USD) from the African Development Bank; and $113 million (USD) from the Islamic Development Bank.
However, Sen. Ordia, while giving a breakdown on the application of the sum approved National Assembly, disclosed that €995 million would be deployed to finance priority projects to address the impact of the COVID-19 pandemic and to improve Nigeria’s food security through the mechanization of agriculture and Agro processing in Nigeria.
He explained that a total of six indigenous assembly plants, one in each geo-political zone have been identified and would be rehabilitated to assemble completely knocked down CKD mechanization farm machinery and equipment to be imported from Brazil.
According to the lawmaker, the CKD mechanization to be imported would, specifically, be adapted for local conditions with job creation opportunities for citizens.
He emphasized that the loan is intended to be used to deliver technological package to small holder farmers for a fee through the establishment is service centres in each of the 774 Local Governments of the Federation to be owned and run by private business entities.
On providing fiscal support to states across the federation, Ordia disclosed that the sum of $750 million from the World Bank would be used to finance States Fiscal Transparency, Accountability and Sustainability (SFTAS) Program in all states of the federation and the Federal Capital Territory (FCT).
He noted that the said financing was approved by the National Assembly in June 2020 as part of the $1.5 billion Development Policy Financing to part finance the Federal government’s 2020 revised budget deficit.
He added that “the Committee found that the Federal objective of the restructuring is to support states to introduce measures to further mitigate fiscal shocks by introducing COVID-19 responsive Disbursement Linked Indicators at state level, to match the fiscal measures at the federal level.
“The Committee notes that it is based on the above restructuring, that additional financing in the sum of $750 million is now required for the COVID-19 response of Nigeria”, Ordia said.
The lawmaker explained that another $750 million would be used to finance the COVID-19 Action recovery and economic stimulus program to support efforts by state governments to protect livelihoods, ensure food security and stimulate economic activity.
Contributing, Senator Solomon Olamilekan (APC, Lagos West) said going ahead to approve the loan request would demonstrate the proactiveness of the National Assembly to insulate the Nigerian economy against a possible decline.
“Embarking on this borrowing plan as explained by the Chairman of the Committee shows that we are being proactive”, he said.
According to the lawmaker, “the bulk of what is contained in this report is for the states – the thirty-six states of the federation. Out of this, only €995 million euros is for the Federal government; while $1.5 billion dollars is to the state governments.
On his part, Deputy President of the Senate, Ovie Omo-Agege (APC, Delta Central) while supporting the report of the Committee, sought to know if the Committee, in coming up with its recommendations, was privy to the terms and conditions of the loans agreement.
Senator Betty Apiafi (PDP, Rivers) who raised viability concerns on projects to be financed at the state level, demanded to know if an arrangement was in place for maintenance of CKD farming machineries to be imported by the federal government from Brazil.
In his response to observations and concerns raised by his colleagues, Senator Ordia explained that the documentation of any loans request can only take place after the National Assembly gives its approval to the external borrowing request before it.
On the issue of maintenance of farming machineries and equipment, the lawmaker explained that there are provisions for the maintenance of same.
In his remarks, the Senate President Ahmed Lawan advised the Committee to liaise with the Debt Management Office (DMO) for updates on the total loans accessed by the federal government.
Reporting by Blessing Ojochenemi