Senate Approves Buhari’s $ 16 Billion, $ 1 Billion, $ 125 Million Unconditional Loan Request | The Guardian Nigeria News
• World Bank report shows massive gaps in poor countries’ debt monitoring systems
• The FEC approves the national development plan 2011-2025 with a value of 348.7 tr N
• External reserves will exceed $ 42 billion by the middle of next year, according to Emefiele
The Senate yesterday approved the sum of 16 billion dollars, 1 billion euros and a subsidy of 125 million dollars in the form of foreign loans to President Muhammadu Buhari to finance the heritage projects of his administration.
The red chamber specifically approved the issue of 500 million euros from the Bank of Industries and 750 million euros of Eurobonds on the international capital market. He asked the President to transmit to the National Assembly the modalities of donor loans.
The implication of Nigeria’s ever-growing debt service, however, is that the government spends almost all of its income on servicing recurring expenses and debts, forcing the federal government to resort to foreign loans, thus increasing again the profile of the country’s external debt.
The federal government revealed in July 2021 that it had spent 1.8 trillion naira on debt service in the first five months of the year, which is about 98% of the total revenue generated during the year. same period.
A total of 4.86 trillion naira was spent by the federal government between January and May 2021. While recurrent expenditure during the reporting period amounted to 3.67 trillion naira, the service of the debt was 1.8 trillion naira.
The Senate yesterday gave its approval following consideration of the report of its committee on local and foreign debts, chaired by Senator Clifford Ordia.
During the presentation of the report, Ordia said that the projects, for which funds are requested in the 2018-2020 borrowing plan, are ongoing.
“The projects will stimulate a revival of business and engineering activities and the consequent tax revenues payable to the government as a result of these productive activities will increase.”
“We will recall that the Senate in plenary session in July 2021 approved the funding of projects as recommended by the Committee. Subsequently, on September 15, 2021, the President of the Senate read another communication from the President containing an addendum to the 2018-2020 (sliding) external borrowing plan in the amount of $ 4,054,476,863, € 710,000,000. and a grant element of $ 125,000,000 for various projects and it was also referred to committee for further legislative action.
“The commission noted that out of a sum of more than $ 22.8 billion approved by the National Assembly as part of the rolling external borrowing plan 2016-2018, only $ 2.8 billion, or 10%, were paid to Nigeria, ”Ordia said.
However, some senators raised eyebrows at the lack of general conditions attached to the loan application. Senate Deputy Speaker Ovie Omo-Agege said he was concerned about the issue, saying he was unaware of the terms and conditions attached to the loans.
He said, “We looked at the terms, but there were allegations that they were written in Chinese and at that time it became clear even from the responses given by the budget office officials; but they sent back to us to give our approval.
HOWEVER, at a time when the sovereign debts of the poorest countries have reached dangerously high levels, global and country-by-country monitoring systems are proving insufficient. These gaps make it more difficult to assess debt sustainability and, for over-indebted countries, to quickly restructure their debt and generate a sustainable economic recovery, according to a new World Bank report.
The report, Debt Transparency in Developing Economies, released yesterday, marks the first comprehensive assessment of global and national sovereign debt surveillance systems.
He finds that debt monitoring today depends on a patchwork of databases with different standards and definitions and varying degrees of reliability, cobbled together by various organizations. Such inconsistencies result in large variations in publicly available debt counts in low-income economies – the equivalent of up to 30 percent of a country’s GDP, in some cases.
“Poorer countries will emerge from the COVID-19 pandemic with the heaviest debt burden in decades, but limited debt transparency will delay critical debt reconciliation and restructuring,” said World Bank Group President David Malpass.
“Improving debt transparency requires a strong legal framework for public debt management, integrated debt recording and management systems, and improvements in global debt monitoring. International financial institutions, debtors, creditors and other stakeholders, such as rating agencies and civil society, all have key roles to play in promoting debt transparency.
The study finds that 40% of low-income countries have not published any data on their sovereign debt for more than two years and that many of those that do publish it tend to limit the information to central government debt.
Many developing countries are increasingly relying on asset-backed loans, in which governments secure funding by pledging future sources of income. Natural resource-backed loans accounted for nearly 10% of new borrowing in sub-Saharan Africa between 2004 and 2018. More than 15 countries have such debts, but none provide details on guarantee agreements.
In addition, the World Bank’s chief economist Carmen Reinhart said that the existing systems for tracking the sovereign debt of the poorest countries are inadequate and mask hidden debts, as they are likely to owe much more than the poorest countries. currently estimated record levels.
The Multilateral Development Bank yesterday released the first comprehensive assessment of global and national debt surveillance systems, saying it had found “huge gaps” in the ability to track how much each country owes – and to whom.
The World Bank, which has long criticized the lending practices of China, the world’s largest creditor, said last month that the debt burden of low-income countries rose 12% to a record 860 billion in 2020, and called for comprehensive efforts to help low-income countries. and middle-income countries achieve more sustainable debt levels.
Reinhart said the actual number could be “significantly higher” as the new study highlighted the need for reforms to ensure better debt statistics, coordinated data collection and integrated debt management systems.
She said the opaque nature of many debt contracts and the utter failure of the private sector to participate in a G20 debt relief initiative clouded the prospects of countries for timely debt restructuring efforts. low and middle income.
Reinhart said his previous research on loans from China showed that official debt statistics captured about half of actual debt, and that fluctuating commodity prices and the continued impact of the COVID-19 pandemic could push debt levels further up.
Possible interest rate hikes on the horizon in richer economies could exacerbate challenges for developing countries, she said, as they could divert investment and increase the already high cost of the loan.
Debt service payments, linked to exports, have doubled to over 20% in 2020, she said, reflecting the growing toll that increased borrowing is taking on poorer countries.
Meanwhile, the Federal Executive Council (FEC) yesterday approved the National Development Plan (PND) 2011-2025, which succeeds the Economic Recovery and Growth Plan (ERGP). The plan has an investment size of 348.7 trillion naira to be contributed by the federal government, state governments and the private sector.
Informing reporters after the meeting chaired by Vice President Yemi Osinbajo at the Presidential Villa, Abuja, Minister of Finance, Budget and National Planning, Ms. Zainab Ahmed, explained that the plan is structured on growth and economic development, infrastructure, public administration, human capital development, social development and regional development.
She revealed that for the size of the investment, the public sector would contribute 49.7 trillion naira while the private sector will contribute 298.3 trillion naira.
According to her, the financing strategy includes broadening the tax base and building the capacity of the private sector by creating investment opportunities and providing quality commitments and incentives.
“The federal government’s expenditure component is N29.6 trillion, or 8.5% of the total spending size, while the states will contribute N20.1 trillion, or 5.8%.”
Also speaking, Minister of State for National Planning, Clément Agba, said that by proposing the NDP, the government had taken into consideration the criticisms against the NDP, including the fact that it was not not inclusive enough.
Central Bank of Nigeria (CBN) Governor Godwin Emefiele said yesterday the country’s external reserve would hit $ 42 billion by the middle of next year, even as he expressed confidence in the continued recovery of the economy. the economy. Emefiele said this at the France-Nigeria Security and Economy Summit in Paris.
The external reserve fell to about $ 33 billion, the lowest in recent times, in the second quarter of the year as the economy struggled under the weight of the impacts of COVID-19 and other structural challenges. It recovered remarkably with a gross figure of $ 41.8 billion.
Yesterday, the governor of the umbrella bank admitted that the economy was not completely out of the COVID-19 strain, but noted that the country had seen the worst, as the future looked brighter. radiant.
“Nigeria’s external reserve is expected to exceed $ 42 billion by mid-2022. This is due to the sustained increase in the price of crude oil, the impact of the issuance of Eurobonds and the stability of the exchange rate, ”said Emefiele.
He was optimistic about the continued deceleration in the rate of inflation. He expects headline inflation to moderate to 15.35% by December and 14.91% by February 2022.
Stressing that “confidence in the Nigerian business environment is increasing,” the governor said that the overall business confidence index is projected at 37.7 index points this month and 57.6 points. index by mid-2022.
He cited the creation of InfraCo PLC and eNaira as some of the catalysts for the next phase of growth. He said the digital currency, which was rolled out recently, would improve the monetary management framework.