Isaac Samuel
President Bola Ahmed Tinubu on Tuesday asked the National Assembly to approve $21.5 billion and €2.2 billion in fresh external loans to finance key infrastructure projects across Nigeria between 2025 and 2026.
This was contained in a letter read on the floor of the House by Speaker Tajudeen Abbas during plenary. The Senate President has also read a similar letter to the Senators.
The President’s request also includes ¥15 billion (Japanese Yen) and €65 million in grants.
The President explained that the loans would be sourced from multilateral and bilateral development partners such as the World Bank, African Development Bank (AfDB), Islamic Development Bank, China Exim Bank, and the French Development Agency (AFD).
The President said that the facilities would come with concessional or semi-concessional terms.
The letter reads in part: “The House of Representatives is invited to note that the 2025-2026 borrowing plan cut across all sectors, with specific emphasis on infrastructure, agriculture, health, education, water supply, growth, Security and employment generation, as well as financial management reforms, among others.
“The House of Representatives in light of the removal of the forest subsidy and its impact on the national economy approval is sold for the external borrowing plan, which amounts to United States Dollars, 21,543,647,912 and 193,856,324.54 euro and ¥15 billion and grant of €65 million.
“I want to emphasize that the projects and programs included in the borrowing plan were selected based on thorough technical and economic evaluations as well as their anticipated contribution to the social economic development of the country.
The President said the initiatives aim to generate employment for more skill acquisition, foster entrepreneurship, reduce poverty and enhance food security, all of which will improve the livelihoods of the average Nigerian.
President Tinubu added that majority of these projects and programs will be implemented across all 36 states and the Federal Capital Territory, in light of the significant infrastructure deficit in the country and the vast financial resources needed to address this gap.
“Amid declining domestic funding, it has become essential to pursue prudent external borrowing to close the financial shortfall, these funds will primarily be directed towards critical infrastructure projects, including the sectors of power, railways and healthcare, among others.
“Given the urgent nature of these needs and the importance of stabilizing the economy, it is crucial to seek the consideration and approval of the House of Representative for the 2025 2026 external borrowing plan. This will enable the government to fulfill its obligations to the Nigerian people through timely disbursement and effective project implementation”, the President said.
In a separate correspondence, the President requested the approval of the House to raise up to $2 billion from the domestic debt market.
The president noted that this form part of efforts to implement the 2023 Presidential Executive Order on foreign currency denominated financial instruments.
The request seeks the National Assembly backing for the Debt Management Office (DMO) to float a foreign currency denominated financial instrument issuance programme in the local market.
According to the letter, the capital raising initiative is in line with the provisions of Section 44 (1 and 2) of the Fiscal Responsibility Act, 2007, which mandates National Assembly approval for new borrowings.
The President added that it also aligns with Section 1(7) of the Executive Order signed on October 19, 2023, which requires legislative appropriation of the proceeds from such financial instruments.
Tinubu noted that the funds will be invested in critical sectors of the economy, with priority given to those capable of accelerating economic growth, boosting foreign exchange earnings, spurring infrastructure development, creating jobs, and generating reasonable returns on investment.
The sectors that will benefit from the funds, according to the President will be selected based on recommendations from the Minister of Finance and Coordinating Minister of the Economy, subject to appropriation by the National Assembly.
“Investors will have the opportunity to earn reasonable income on their US dollar funds, while allowing the government to channel the funds to productive uses in the economy.
“It is a viable fiscal strategy with potential to boost accretion to reserves and promote exchange rate stability. It will also help diversify the sources of funding for the federal government of Nigeria and deepen the investor base for fgn securities. And it will also increase the range of products in the local financial market and enable investors to diversify their portfolios”, the President said.
President Tinubu however acknowledged that the proposed borrowing would increase the nation’s public debt stock and raise debt servicing obligations.
In a third letter, the President sought the Green Chamber approval to raise a N757.98 billion bond to clear outstanding pension liabilities under the Contributory Pension Scheme (CPS) as of December 2023.
The bond will be issued to fund the Redemption Fund domiciled at the Central Bank of Nigeria and managed by the National Pension Commission (PenCom).
He said the funds are expected to pay off accrued pension rights of federal civil servants who retired since the commencement of the scheme in 2004.
