…..Submit 2025-2027 MTEF, FSP to NASS
By Christiana Ekpa
President Bola Tinubu Tuesday seeked the approval of the National Assembly to raise the sum of N1,767,610,321,779, which is equivalent of $2.209 billion provided as new external borrowing in the 2024 Appropriation Act to finance the budget deficit of N9.179 trillion.
The President letter, dated November 15, was read on the floor of the House on Tuesday by the Speaker, Hon. Tajudeen Abbas.
The details said: “In accordance with the provisions of Sections 21(1) and 27(1) of the Debt Management Office (DMO) (Establishment, Etc.) Act, 2003, and the approval of the Federal Executive Council, I write to request for a Resolution of the National Assembly to raise the sum of N1,767,610,321,779.00 (equivalent of $2,209,512,902.22 at the Budget Exchange Rate of USD1.00/N800) provided as New External Borrowing in the 2024 Appropriation Act to part finance the budget deficit of N9.179 trillion.
“The Right Honourable Speaker 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 (Table 1). The latter is the subject of this request.
“The plan is to raise the New External Borrowing of $2.21 billion from a combination of commercial sources: Issuance of Eurobonds, Issuance of debut Sovereign Sukuk in the International Capital Market (ICM) and Bridge Finance/Syndicated Loans.”
The president explained that Nigeria could raise all or part of the new external borrowing of $2.21 billion through the issuance of Eurobonds in the ICM.
Tinubu noted that Nigeria has been a regular issuer in the ICM and had raised $16.92 billion out of which $15.12 billion is outstanding.
He said that the ICM is now open to countries similar to Nigeria, and so far, Cote d’Ivoire, Benin, Kenya, and Cameroon have issued Eurobonds in the ICM in 2024.
The president said: “Issuance of Sovereign Sukuk with a Guarantee from the ICIEC. A debut Sovereign Sukuk of up to USD500 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.”
The president noted that 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.
He clarified that this option would only be used if for any reason the issuance of Eurobonds is delayed due to market conditions, because there is an urgent need for funds.
Tinubu emphasised that the precedent for accessing Bridge Finance/Syndicated Loan is that the proceeds of the Eurobonds would be used to offset the loan.
He stated: “The Right Honourable Speaker may further wish to note all the options will be pursued simultaneously for the capital raising of USD2.21 billion considering the costs, relative benefits, and timing of each of them to the country. However, emphasis will be on the Issuance of Eurobonds (Option 1) which is typically faster to conclude. Additionally, a larger amount can be raised through Eurobonds at a relatively lower cost.
“Conditions of the proposed External Borrowings, the Right Honourable Speaker 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 is attached as Appendix I for your information.”
The president 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.
