The federal government has explained why it wants to take a $30.54 billion (about N9.61 trillion) loan, which is believed to be the biggest single external loan request by any government in recent history.
President Muhammadu Buhari, who on Tuesday requested the National Assembly’s accelerated approval of the borrowing plan, said it would include a $575 million World Bank loan.
The total loan will fund a number of key projects in the country, he said.
The projects cut across key sectors of the economy, with special emphasis on infrastructure development, agriculture, health, education, water supply, growth and employment generation, poverty reduction through social safety net programmes and governance and financial management reforms.
Mr. Buhari said the proposed programmes would receive about $11.274 billion of the total loan, while special infrastructure projects would take $10.69 billion. Euro bonds will take $4.4 billion and federal budget support, $3.5 billion, he said.
Details of the projects to be executed with the World Bank loan include polio eradication support and routine immunization project ($125 million); community and social development project ($75 million), and Nigerian states health programme investment project ($125 million).
Others include State education programme investment project ($100 million), Nigerian youth employment and social support project ($100 million), and Fadama 11 project ($50 million).
The huge loan is the highest single borrowing by the Nigerian government in history.
Consolidated public debt stock in the Central Bank of Nigeria (CBN) annual report 2014 showed that between 2010 and 2014 the highest external loan by government was N1.65 trillion in 2014.
External debt for preceding years were N689.8 billion in 2010; N896.8 billion in 2011; N1.03 trillion in 2012 and N1.39 trillion in 2013.
The loan is expected to help reflate the nation’s economy has been in recession for months.
The government had earlier announced a $15 billion (N4.72 trillion) fiscal stimulus plan for the troubled economy.
The Minister of Budget and National Planning, Udoma Udoma, said the plan would be funded majorly through a number of sources, namely sale of some national assets and advance payment by joint venture operators for license renewals.
Other sources included infrastructure concessions, use of recovered funds as well as long term, low interest loans to bridge funding gap.
The Minister of Finance, Kemi Adeosun, had also said as part of an external borrowing plan approved by the Executive Council of the Federation, the government would borrow cheapest available monies to fund key ongoing projects.
The huge borrowing is seen as an indication that the government might have quietly shelved the idea of selling asset, amidst stiff opposition from Nigerians.
The Director-General, Debt Management Office (DMO), Abraham Nwankwo, said on Tuesday that for Nigeria to pull the economy out of recession, government must seriously embrace “conventional public borrowing” to fund critical projects.
Mr. Nwankwo said long before the drop in global crude oil prices in mid-2014, it was clear Nigeria needed to invest about $25 billion per annum for 7 to 10 years to cover its huge infrastructure deficit.
With the drastic drop in oil revenues, he said the country faced additional challenge in financing gap in public revenues estimated at about $20 billion per annum.
“This means Nigeria’s total investment deficit is not $25 billion per annum, but $45 billion per annum,” Mr. Nwankwo said.
With the huge “structural financing gap (SFG),” he said the country needed to tap capital from all available sources, including short, term and long-term borrowing with tenors of 15 years and above, to survive.
With average cost of domestic debt higher than average cost of external debt by more than seven percent, the DMO boss said significant domestic borrowing would worsen existing high debt service-to-revenue ratio.
Prime lending rate range between 15.88 and 16.95 per cent, while maximum lending rate range from 25.07 to 26.07 per cent.
The decision to go for the huge external borrowing, he explained, was to avoid crowding out the private sector, to allow them enough borrowing space to play their role in growing the economy, in response to the infrastructure environment by government.
“The essence of the massive investment plan is that within 5 to 7 years, the country should be moving on a trajectory of sustainable and continuously strengthening economic recovery.
But the borrowing plan has been criticised by some Nigerians.
The lead director, Centre for Social Justice (CENSOJ), Eze Onyekpere, described government decision to take more loan as “fiscal irresponsibility”.
“We are paying about $61 billion in external debt already. If we add another $29.96 billion to be borrowed, we will be talking about $90.96 billion. What kind of projects are they going to use the loan on?
Mr. Onyekpere admitted he was yet to get the details of the loans proposal.
“Unless, they are projects that can re-generate themselves for government to repay the loans. otherwise, we see it as high fiscal irresponsibility and recklessness,” he said.