By Henry Umoru, Emman Ovuakporie & Johnbosco Agbakwuru
ABUJA—THE two arms of the National Assembly, NASS, yesterday approved President Muhammadu Buhari’s request to raise additional $500 million eurobond from the international capital market to fund the 2016 Budget deficit.
In the Senate, the approval was given, following an executive communication from the President that the lawmakers considered his request for $500 million Eurobond.
Earlier, deputy Senate leader, Senator Bala Ibn Na’allah, asked that Senate dissolved to the Committee of the whole to approve the request because of the urgency of the matter.
In supporting the motion, Senate Minority leader, Senator Godswill Akpabio, said in spite of non-consultation, he agreed to it because of the urgency of the Eurobond to address the problems of the country in the overall interest of Nigeria and Nigerians.
It would be recalled that the Presidency had in February, sought the approval of the National Assembly to raise additional $500 million eurobond from the international capital market.
Vice President Yemi Osinbajo, while in acting capacity, had in February 22, 2017, in a letter explained that the fund would be used to finance the total sum of N4.023 trillion budget deficit in the 2016 and 2017 fiscal years respectively.
The letter had read thus: “Refer to line items 229 and 244 of the 2016 Federal Government of Nigeria (FGN) Appropriation Act, which provided for a deficit of N2,204.742 billion and new borrowings of N1,818.675 billion respectively.
“The Act also provided for domestic borrowing of N1,182.798 billion and external borrowing of N635.877 billion, in line items 245 and 246 respectively.
“Following the high over-subscription of the recent USD 1 billion eurobond issuance, we wish to take advantage of favourable market conditions to issue a eurobond debt instrument of USD 500 million to fund the implementation of the 2016 budget, which is still ongoing.
“You may wish to note that in line with the requirement of securities issuances in the ICM, a specific resolution of the National Assembly, as a firm confirmation of the approval of the Legislature for the Federal Government of Nigeria (FGN) to borrow the USD 500 million through the issuance of a eurobond debt instrument in the ICM, is required.’’
In the House of Representatives, the lawmakers, in considering the report from Adeyinka Ajayi-led Committee on Aids, Loans and Debt Management at the Committee of the Supply, urged the executive to halt the issuance of the bond, following new investment policy recently rolled out by the Donald Trump-led US government which offers higher returns, adding that issuing the bonds now might discourage investors from subscribing to it.
The chairman, while giving a synopsis of the report, had noted that the international market/foreign investors had slightly moved against Nigeria, considering the US offer, adding that the committee had an understanding with the Minister of Finance and relevant agencies to wait for a favourable period before issuing the $500 million eurobond.
He further explained that the Debt Management Office, DMO, negotiated down from 50 percent cost of first issuance quoted by the transaction parties to a maximum of one-third.
Adeyinka said the sum of $600 million loan had been taken from African Development Bank, and that the revenue shortfall by the Federal Inland Revenue Service, FIRS, Customs and Nigerian National Petroleum Corporation, NNPC, of over N1 trillion, Nigeria with no other option than to source for external funding.
He said: “The estimated cost of the new issuance is about 0.25 percent of the expected proceed of $500 million being approximately N340 million which is lower when compared with 0.32 percent cost for the first issuance of $1 billion, which stood at approximately N986 million.
“After concluding the first eurobond issuance as at February 9th 2017, the government wants to take the USD500 million eurobond quickly at a favourable interest rate so that the international market interest in Nigeria will not wane.
“However, despite development in the international capital market that may make the issuance slightly more expensive than anticipated, the government is desirous of procuring approval of the National Assembly in readiness for favourable movement in the market”, the Committee head informed the House.
“The economy is struggling and that the funding gap in the 2016 budget being close to N1 trillion are known facts, there is need to seek all lawful options to abridge the gap to ameliorate the suffering of Nigerians.
“That the Federal Government having exhausted the domestic borrowing window in the 2016 budget, the nation can only borrow from the international market as approved under the 2016 foreign borrowing window.”
He also gave a reflection of the $1 billion eurobond which was oversubscribed by over 700 percent, explaining that the eurobond performance had taken a downward trend, an indication that investors were showing interest in Nigerian bond.
‘’Therefore, the interest rate that is taking implies that Nigeria can get the bond at a better rate. It also indicates that international community rating of the Nigeria economy is high”.
“Development in other nation can however trigger the investors to go in that direction but if the situation is favourable in our country, it can further enhance confidence in Nigerian economy,” he said.
Earlier, Femi Gbajabiamila, House Leader, explained that the Appropriation Act, 2016 provided for a deficit of N2.204 trillion and borrowing of N1.818trillion, adding that the domestic borrowing had been incurred, while the N635.877 billion external borrowing had been fully accessed.
Having approved the loan request as contained in the committee recommendations, the House therefore mandated the Committee to monitor the disbursement of the approved $500 million eurobond as specified in the 2016 Appropriation Act, in a bid to ensure compliance.