President Muhammadu Buhari has requested Nigeria's upper legislative chamber, the Senate to approve another foreign loan of $5.5 billion to fund the 2017 budget.The request is contained in a letter sent to the Senate by Buhari and read by the Senate President, Dr. Bukola Saraki on Tuesday in Abuja.
He said the Act also provided for domestic borrowing of N1.254tn and external borrowing N1.067tn (about USD3.5bn).
The four- page letter which was addressed to Senate President, Bukola Saraki is entitled, " Request for the approval of External Loans for: 1.
Buhari in the letter explained that the $3 billion being sought from the global capital market (ICM) will be deployed to refinance maturing domestic debt to achieve more stability in the country's debt stock and create more borrowing space in the domestic market for the private sector.
"Issuance of Eurobond in the ICM and/or loans syndication by the banks in the sum of $3bn for refinancing of maturing domestic debts obligations of the Federal Government of Nigeria, while looking forward to the timely approval of the National Assembly to enable Nigerians to take advantage of these opportunities for funding".
President Buhari however allayed fears of Nigerians on possible effect or problems hat may come up, saying that the proposed external borrowing of USD3.0 billion re-finance maturing Domestic Debt would not lead to an increase in the public debt portfolio against the backdrop that the debt already exists, already in the form of high interest short term Domestic Debt.
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According to Buhari, the Federal Government planned to substitute domestic debts with "less expensive long-term external debts".
"Rather, the substitution of domestic debt with relatively cheaper and long-term external debt will lead to a significant decrease in debt service costs".
"With respect to the terms and conditions of the proposed external borrowings, the Senate may wish to note that being market-based transactions, the terms and conditions of the borrowings can only be determined at the point of issuance of finalisation based on prevailing market conditions in the ICM".
"This is due to the planned recruitment of 700 additional staff in 2017 and salary review by 30 per cent approved by the Salary, Wages and Income Commission", the report of the Senate Committee on Finance on the FIRS budget, which was approved by the lawmakers, read.
"It should be noted that current market conditions are considered more favourable than at the time of Nigeria's last issuances of the Eurobond in March 2017 and the Diaspora Bond in June 2017, with secondary market yields lower than the coupons".
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