House approves Buhari’s 850 billion yen loan request

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The House of Representatives approved the request by President Muhammadu Buhari to contract a loan of 850 billion euros to finance part of the 2020 budget.

A fortnight ago, the Senate also winked at the borrowing plan requested by the president.

The House’s approval came after Mr Buhari wrote to the Green Chamber asking for approval for the 850 billion yen loan that is to come from domestic markets “to fund critical investment projects in the 2020 budget. “.

The House, at the time, had set up an ad hoc committee headed by House leader Alhassan Doguwa. In the report tabled by the committee on Tuesday, it recommended approval of the president’s request.

The committee recommends that the House “approve the request to raise 850 billion yen in the new external borrowing plan of the 2020 naira credit law from the national capital market,” the report said.

“Public disapproval”

The approval of the loan by the two legislative chambers was accompanied by a public reaction.

The government led by Buhari has maintained that Nigeria has not exceeded its borrowing threshold when its debt-to-GDP ratio is factored in.

Some have argued, however, that Nigeria’s debt-to-income ratio is restrictive enough to take on new loans, as debt servicing accounts for around a quarter of the 2020 budget.

But the drop in the price of oil and the drop in its demand due to the devastating coronavirus pandemic, have made the 2020 budget a mere wishlist.

Although some key projects in the budget are tied to foreign loans, the devastating impact of the coronavirus pandemic on the global economy, particularly the international capital market, has caused the federal government to reassess its borrowing plans for the year.

Part of the reassessment resultDebt Management Bureau director general Patience Oniha said was to decide to raise the 850 billion yen, previously approved as external borrowing, from domestic sources.

“This conversion of external borrowing to domestic borrowing aims to ensure that the implementation of the 2020 finance law is not compromised by the lack of funds.

“So the 850 billion yen is not new or progressive borrowing, but rather a change in the source of external borrowing from domestic sources,” said the head of the debt management agency.

Meanwhile, external sources have over the years been a more stable and reliable source for federal borrowing. This is due to their low interest rate, longer repayment moratorium, and how MSMEs are avoided being squeezed out of the few borrowing opportunities available to grow their businesses and the economy.

In Nigeria’s case, options are limited following the grim effect the coronavirus pandemic has had on the international capital market. As the global economy approaches the threshold of a major recession, countries have been forced to fold in on themselves to stay afloat.

Nigeria’s growing debt profile, as of September 30, 2019, is estimated at 26.2 trillion yen. Of this amount, the total domestic debt amounts to about 18 trillion yen, or 68.45 percent.

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