The House of Representatives has approved the request by President Muhammadu Buhari to source ₦850 billion loan to fund part of the 2020 budget.
About a fortnight ago, the Senate also gave its nod to the borrowing plan requested by the president.
The House’s approval came after Mr Buhari wrote the green chamber seeking its approval for the ₦850 billion loan which is to be sourced from domestic markets “to fund critical capital projects in the 2020 budget.”
The House, at the time, set up an ad-hoc committee headed by House Leader Alhassan Doguwa. In the report laid by the committee Tuesday, it recommended the approval of the president’s request.
The committee recommends the House to “approve the request to raise ₦850 billion in the new external borrowing plan in the 2020 Appropriations Act in naira from the Domestic Capital Market,” the report read.
The approval of the loan by both legislative houses has come with public backlash.
The Buhari-led government has maintained that Nigeria has not exceeded its borrowing threshold when its debt-to-GDP ratio is considered.
Some have, however, argued that Nigeria’s debt-to-revenue ratio is enough restraint to pick up new loans as debt serving is about a quarter of the 2020 budget.
But the drop in oil price and fall in its demand due to the ravaging coronavirus pandemic, has made the 2020 budget a mere wish list.
Although some key projects in the budget were tied to foreign loans, the ravaging impact of the coronavirus pandemic on the global economy, particularly the international capital market, made the federal government to reappraise its borrowing plans for the year.
Part of the outcome of the reappraisal, the Director-General of the Debt Management Office, Patience Oniha, said, was to decide to raise the ₦850 billion, earlier approved as external borrowing, from domestic sources.
“This conversion from external to domestic borrowing is to ensure that the implementation of the 2020 Appropriation Act is not jeopardised by lack of funds.
“Thus, the ₦850 billion is not new or incremental borrowing, rather it is an amendment of the source of borrowing from external to domestic sources,” the head of the debt management agency said.
Meanwhile, external sources have over the years been a more stable and reliable source for federal borrowings. This is due to their low interest rate, longer repayment moratorium, and how MSMEs are saved from being crowded out from the few borrowing opportunities available to grow their businesses and the economy.
In the case of Nigeria, the options are limited on the heels of the grim effect the coronavirus pandemic has had on the international capital market. With the global economy inching towards the threshold of a major recession, nations have been forced to look inwards to stay afloat.
Nigeria’s rising debt profile, as of September 30, 2019, is put at ₦26.2 trillion. Of this amount, total domestic debts is about ₦18 trillion, or 68.45 per cent.