President Muhammadu Buhari has asked the National Assembly (NASS) to approve his administration’s external borrowing plan of $29.96bn for the execution of key programmes and infrastructural projects across the country.
The sum, if approved, will be spent on projects in this year’s budget and up till 2018.
The President also sought legislative approval for virements totalling N180.8bn in the 2016 budget to cater for votes by some sectors of the economy.
Buhari made the requests in two separate letters to both the Senate President, Bukola Saraki; and Speaker of the House of Representatives, Yakubu Dogara, which were read to lawmakers in both chambers of the National Assembly during Tuesday’s plenary.
The President, in the external borrowing plan, said the fund would be spent on the provision of infrastructure in agriculture, health, education, water supply, growth and employment generation, and poverty reduction through social safety net programmes, among others.
“The total cost of the projects and programmes under the borrowing (rolling) plan is $29.960bn, made up of proposed projects and programmes’ loan of $11.274bn; special national infrastructure projects, $10.686bn; Eurobonds, $4.5bn; and Federal Government budget support, $3.5bn,” Buhari stated.
The President explained that the loan became necessary due to the serious infrastructural deficit the country was facing.
“Considering the huge infrastructure deficit currently being experienced in the country and the enormous financial resources required to fill the gap in the face of dwindling resources, and the inability of our annual budgetary provisions to bridge the deficit, it has become necessary to resort to prudent external borrowing to bridge the financing gap, which will largely be applied to key infrastructure projects, namely power, railway and roads projects, among others,” he stated.
In the N180bn virement request, the President noted that it would involve the transfer of the money already appropriated for special intervention programmes, both recurrent and capital, to critical recurrent and capital items.
According to him, the request becomes necessary due to a number of reasons, including shortfalls in provisions for personnel costs, inadequate provision for the Amnesty Programme, continued requirements to sustain the war against insurgency, and the depreciation of the naira.
The President’s letter on the subject read in part, “In the course of implementing the 2016 Appropriation Act, several MDAs have presented issues pertaining to salary shortfalls, the settlement of part of which has led to the depletion of the public service wage adjustment. This vote, which had a provision of N33,597,400,000, now has a balance of N2,758,296,000.
“The Committee on Salary Shortfalls, set up by the Minister of Finance, has come up with a figure of N41,875,983,020 as the amount required to settle salary shortfalls of non-lPPlS MDAs. Similarly, most of the lPPlS (Integrated Payroll and Personnel Information System) MDAs have already been notified by the Office of the Accountant-General of the Federation that they would soon be locked out of the IPPIS platform, as their personnel cost budgets would not cover salaries for the rest of the year.
“The contingency vote of N12bn has a balance of only N1,827,570,443. It is considered necessary to augment this vote in the light of frequently emerging contingencies. Only N20,000,000,000 (already fully released) was provided in the 2016 budget for the Niger Delta Amnesty Programme. Consequently, the allowances to ex-militants have only been paid up to May 2016. This is creating a lot of restiveness and compounding the security challenge in the Niger Delta.”
It added, “The provision for the NYSC (National Youth Service Corps) in the 2016 budget is inadequate to cater for the number of corps members to be mobilised this year. In fact, an additional N8.5bn is required to cover the backlog of 129,469 corps members who are currently due for call-up but would otherwise be left out till next year due to funding constraints. Similarly, the provision for meal subsidy for the Unity Colleges is inadequate for the number of students in the schools.”
A breakdown of the virement proposal showed that N71.8bn is for public service wage adjustment; N35bn for the Amnesty Programme; N19.8bn for the mobilisation of remaining batches of youth corps members for the year, among others.
The President added, “You may also wish to be informed that the Federal Ministry of Power, Works and Housing has also requested for the virement of the sum of N300m appropriated under the 2016 appropriation of the Transmission Company of Nigeria for the construction of the 132KVA substation at Gwaram, Jigawa State, with Project Code No. TCN 018023829, and the construction of two units of 60MVA 132/33 in Gagarawa, Jigawa State.
“However, it was observed that while the line to be vired from exists in the budget book published by National Assembly, the lines to be vired to do not exist. It is, therefore, recommended that the sum of N300m meant for the construction of the 132KVA substation at Gwaram, Jigawa State be vired to budget line TCN 018021775 for the reconstruction of fallen transmission towers and replacement of glass insulators, etc., which have an appropriation of N4,880,000,000.”
Meanwhile, he Debt Management Office (DMO) has advised the Federal Government not to borrow above $22.08 billion in 2017.
DMO gave the recommendation yesterday in its 2016 Debt Sustainability Analysis (DSA) report, obtained by the News Agency of Nigeria (NAN) in Lagos.
In the report, DMO stated that the end-period on Net Present Value (NPV) of the Total Public Debt-to- GDP ratio for 2016 for the Federal Government was projected at 13.5 per cent.
“The maximum amount that can be borrowed (domestic and external) by the Federal Government of Nigeria in 2017, without violating the country-specific threshold, will be $22.08 billion (i.e. 5.89 per cent of $374.95 billion).
“The Debt Management Strategy, 2016-2019 provides for the rebalancing of the debt portfolio from its composition of 84:16 as at the end of December, 2015 to an optimal composition of 60:40 by the end of December, 2019 for domestic to external debts, respectively,” the report stated.
It explained that the development supported the use of more external finance for funding capital projects, noting that the policy was in line with the focus of the present administration on speeding up infrastructure development in the country.
The DMO stated that it would achieve this by substituting the relatively expensive domestic borrowing in favour of cheaper external financing. The report states that: “This policy stance has been reinforced by the recent deterioration in macroeconomic variables, particularly with respect to the rising cost of domestic borrowing.
“Hence, the shift of emphasis to external borrowing would help to reduce debt service burden in the short to medium-term and further create more borrowing space for the private sector in the domestic market.
“Accordingly, for the fiscal year 2017, the maximum amount that can be borrowed is $22.08 billion and it is proposed to be obtained from both the domestic and external sources as follows: “New Domestic Borrowing $5.52 billion (equivalent of about N1.6 trillion) and New External Borrowing: $16.56 billion (equivalent of about N4.8 trillion).”
The DMO also emphasised that the recommendation was made, taking into account the absorptive capacity of the domestic debt market and the options available in the external market. Nigeria’s total debt portfolio rose 30 per cent to $62 billion in 2014, up from $47.6 billion as at September 2013.
The country’s external debt stood at $9.52 billion, 15 per cent of the entire debt stock. Domestic borrowing, however, accounted for bulk of the total money owed by Africa’s largest economy. Prior to the 2005 debt relief, bad debt management practices led to the payment of $4.9 billion yearly on debt servicing
