Lagos, Nigeria – November 22, 2024 – The Nigerian Senate has granted approval for President Bola Tinubu‘s request to borrow N1.77 trillion (approximately $2.2 billion) externally to finance the 2024 budget deficit. The approval was given after the Senate reviewed the report from its Committee on Local and Foreign Debt during Thursday’s plenary session.
The loan is intended to help finance a portion of the N28.7 trillion 2024 national budget, which is expected to cover various capital projects and ongoing initiatives. The government estimates a budget deficit of ₦9.17 trillion, and the external borrowing is part of efforts to bridge this gap.
Loan Details and Sourcing
The external loan will be sourced through Eurobonds in the international capital markets. President Tinubu’s request, which was submitted earlier this week, aligns with the 2024 Appropriation Act and complies with sections 21 and 27 of the Debt Management Office Establishment Act, 2003. It has already been approved by the Federal Executive Council.
The funds will be raised through the issuance of Eurobonds, with a fixed coupon rate that is expected to be lower than the government’s domestic borrowing rates. The loan will be issued at an official exchange rate of $1/N1,640 and will be used to implement capital projects outlined in the 2024 budget.
Impact on National Economy
According to Aliyu Wamakko, Chairman of the Senate Committee on Local and Foreign Debt, the loan will not only finance budget deficits but also bolster the country’s foreign reserves. He emphasized that the borrowing will help support ongoing government projects and contribute to the nation’s Debt Management Strategy. This strategy aims to reduce the cost of borrowing, extend the maturity of public debt, and free up space in the domestic market for other borrowers, ultimately strengthening Nigeria’s financial position.
The committee further noted that the Nigerian government has a proven track record of raising funds in the international capital market, having raised $16.92 billion in Eurobonds over the years, with $15.12 billion currently outstanding.
Contingency Plans
In the event that market conditions delay the issuance of the Eurobonds, the federal government has prepared an alternative plan, which includes obtaining bridge finance or syndicated loans.
Next Steps and Oversight
The Deputy Senate President, Barau Jibrin, presided over the plenary session and affirmed that the loan request is in the national interest. The Senate approved the loan without debate, and members of the National Assembly will collaborate with the Ministry of Finance to ensure that the borrowed funds are effectively utilized for their intended purposes.
This approval marks a crucial step in Nigeria’s efforts to manage its national debt and implement key infrastructure projects amid rising fiscal challenges.