President Bola Ahmed Tinubu has sought National Assembly’s approval to borrow N1, 767,610,321,779.
If okayed , the loan will be used to partly finance the N9.7 trillion deficit in the N35.1 trillion 2024 Appropriation Act.
The President explained in letters to Senate President Godswill Akpabio and House of Representatives Speaker Tajudeen Abbas that the request was in line with Sections 21(1) and 27(1) of the Debt Management Office (DMO) (Establishment, Etc.) Act, 2003, and the approval of the Federal Executive Council (FEC).
The letters dated November 15 were read by Akpabio and Tajudeen on the floors of both chambers yesterday.
The President’s letter was read by the two leaders at the resumption of plenary after a two-week break.
The President said: “I write to request for a resolution of the National Assembly (NASS) to raise the sum of N1,767,610,321,779.00 (the equivalent of $2,209,512,902.22 at the budget exchange rate of $1.00/N800) provided as new external borrowing in the 2024 Appropriation Act to part finance the budget deficit of N9.179 trillion.
“You may wish to recall that 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.”
Tinubu said the funding plan was to raise the new external borrowing of $2.21 billion from ‘’a combination of commercial sources: Issuance of Eurobonds, debut Sovereign Sukuk in the International Capital Market (ICM) and bridge finance/syndicated loans.’’
On the Issuance of Eurobonds, the President said Nigeria could raise all or part of the new external borrowing of $2.21 billion through the issuance of bonds in the ICM.
“Nigeria has been a regular issuer in the ICM and has raised $16.92 billion out of which $15.12 billion is outstanding. The ICM is now open to countries similar to Nigeria, and so far, Cote d’Ivoire, Benin, Kenya, and Cameroon issued Eurobonds in the ICM in 2024,” he said.
On the second option of the issuance of Sovereign Sukuk with a guarantee from the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC), Tinubu said a debut Sovereign Sukuk of up to $500 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.
On the third option of Bridge Finance/Syndicated Loans, he said, “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.”
The President said the options would be pursued simultaneously for the capital raising of $2.21 billion considering the costs, relative benefits, and timing of each of them to the country.
He, however, stated that the emphasis would be on the Issuance of Eurobonds because it is faster to conclude.
Tinubu added that a larger amount could be raised through Eurobonds at a relatively lower cost.
On the summary of indicative terms and conditions, he said: “For the terms and conditions of the proposed external borrowings, you may note that 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.
‘’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. Meanwhile, the Indicative terms and conditions for Eurobonds, which can be used as a guide are attached as Appendix I for your information.”
The president further said: “The funds are needed to give more impetus to the ongoing implementation of the projects and programmes in the 2024 Appropriation Act, which were designed to stabilise the economy and put it on the path of sustainable growth and development.
“The key projects to which the proceeds will be deployed from the priority sectors of the economy, such as power, transport, agriculture, defence and security. It is also important to add that the proceeds will increase the accretions to the external reserves as the proceeds will be received into the Central Bank of Nigeria’s account, and thereby support the Naira exchange rate.
As stated in Paragraph 1 above, you may wish to note that the Resolution of the NASS in the attached format (Appendix II) 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 $2,209,512,902.22 at the budget exchange rate of $1.00/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 as stated in Paragraphs 1 and 7.
‘’ Accordingly, you are invited to consider and approve a resolution in the format outlined hereunder, which is also attached as appendix II:
“i. To implement the new external borrowing of N1,767,610,321,779.00 in the 2024 Appropriation Act the amount should be raised from one or more sources, namely: issuance of Eurobonds in the ICM, Issuance of debut Sovereign Sukuk in the ICM, and Bridge Finance/Syndicated Loans subject to market conditions, including time to market”
“ii. Based on availability and costs, to issue Eurobonds for $1.70 billion or more, but not more than $2,209,512,902.22 approved as new external borrowing in the 2024 Appropriation Act; and,
“iii. The Honourable Minister of Finance and Coordinating Minister of the Economy, working with the Debt Management Office are authorised to take all relevant and necessary actions required to give effect to this resolution of the National Assembly.”
