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The Nigerian Senate has approved the N1.77trn ($2.209 billion) external borrowing request by President Bola Tinubu to finance 2024 budget deficit.

The loan was approved after the Upper Chamber considered the report of its committee on local and foreign debt during plenary on Thursday.

The loan would be part of the funds that will be used to finance the N28.7 trillion 2024 budget as incorporated in the Appropriation Act.

President Tinubu on Tuesday requested the Senate’s approval for the new external borrowing  to finance Nigeria’s 2024 budget deficit, estimated at N9.17 trillion.

In a letter addressed to the Senate, the President explained that the request is in line with the provisions of the 2024 Appropriation Act, as well as Sections 21 and 27 of the Debt Management Office Establishment Act, 2003, and has been approved by the Federal Executive Council

The external loan will be sourced from the country’s Eurobonds in international capital markets and gains from financial laws of the country.

Depending on the tenor of the Eurobonds to be issued, and market conditions at the time of issuance, the funds are expected to be raised at Coupons of reasonable percentage per annum, which is much lower than the federal government’s domestic borrowing rates per annum.

According to the report, the loan will be at the official exchange rate of $1.00/N1,640 for the implementation of capital projects as contained in the 2024 budget.

Aliyu Wamakko, chairman of the committee, while presenting the report claimed that if the external borrowing request is approved, it will strengthen the nation’s foreign reserve.

He said the federal government needed the fund in order to complete ongoing implementation projects and programmes in the budget.

Wamakko added that the issuance of the bonds will contribute to the implementation of the Debt Management Strategy which seeks to reduce the cost of borrowing, lengthen the maturity of the public debt stock,  free-up space in the domestic market for other borrowers and will help increase Nigeria’s external reserves.

The chairman  observed that the country has the capacity to raise all or part of the $2.209bn through the issuance of Eurobonds.

The committee chairman claimed that Nigeria has been a regular issuer in the International Capital Market and has raised $16.92 billion, out of which $15.12 billion is outstanding. 

He also said if the issuance of the Eurobonds is delayed due to market conditions, the Nigerian government will then resort for the Bridge finance/syndicated loans.

The Senator said members of the National Assembly will collaborate with the Ministry of Finance to ensure that the fund is appropriately utilised when it is finally sourced. He therefore recommended approval of the president’s request.

He therefore recommended the approval of the issuance of the bond to enable the federal government settle outstanding claims and liabilities.

The plenary session, presided by Barau Jibrin,  the deputy Senate President, did not debate the loan request before its approval.

The deputy Senate President said the external borrowing request was in the interest of the country.