President Muhammadu Buhari yesterday requested the National Assembly to approve $5.5 billion foreign loan to fund capital component of the 2017 budget and refinance maturing domestic debt obligations.
Issuance of $2.5 billion for 2017 budget
Buhari told the National Assembly that in order to implement the External Borrowing approved in the 2017 Appropriation Act, the FGN issued a USD 300 million Diaspora Bond in the International Capital Market (ICM) in June 2017.
He said the balance of the 2017 External Borrowing, in the sum of USD3.2 billion is planned to be partially sourced from issuances in the ICM of USD2.5 billion through Eurobonds or a combination of Eurobonds and Diaspora Bonds, while USD700 million is proposed to be raised from multilateral sources.
“It should be noted that the intention is to issue the Eurobonds first, with the objective of raising all the funds through Eurobonds, and that Diaspora Bonds will only be issued where the full amount cannot be raised through Eurobonds,” he said.
External loan: Experts call for detailed, doable repayment plan
Experts have expressed worry over Federal Government’s capacity to repay the country’s rising foreign debt profile considering declining revenue inflows into the country.
The experts, who spoke exclusively to Daily Trust yesterday on the $5.5 billion foreign debt approval sought by the President said the foreign loan will no doubt have positive impact on the economy, if invested in infrastructure with a detailed and doable repayment plan.
Professor of Financial Economics in the University of Uyo, Awka Ibom State, Leo Ukpong, said the foreign debt will affect the nation’s inflation and may reverse the downward trend being recorded in recent months.
“Personally, I think borrowing outside the country is not a bad thing but the magnitude of the debt is very high,” he said.
An investment Research Analyst, who heads the Investor Relations Department of the United Bank for Africa Plc, Abiola Rasaq told Daily Trust that the country’s total debt profile was still within acceptable limit considering the size of the economy saying “What becomes concerning is our ability to pay back on those obligations because these are loans and we have to pay them back.”
He said government was trying to reduce the level of domestic borrowings to stop crowding out private sector credit.
“The more government borrows domestically, the less funds will be available to lend to the private sectors,” he said.