The House of Representatives on Tuesday passed President Muhammadu Buhari’s request to raise N850 billion in new external borrowing in the 2020 Appropriation Act from the domestic capital market.
This was after the House considered the request in the Committee of Supply on the floor.
Prior to the considerations, the House Leader, Rep.Mohammed Monguno given a brief insight into the reason for the request and why he believed the House should not accede to Buhari’s request.
In the letter of President Muhammadu Buhari dated March 24, he had said the decline in price of oil in the international market and the corona virus pandemic had made borrowing from the international capital market unattractive.
So, to finance deficits in the 2020 budget, Buhari asked the House to allow him borrow from the domestic capital market.
His letter entitled: “Request for a resolution of the National Assembly to raise N850 billion in new external borrowing plan in the 2020 Appropriation Act in naira from the domestic capital market, reads: “The House of Representatives may wish to recall that the 2020 Appropriation Act provides for N1.594 trillion in new borrowing comprising N744 billion in domestic borrowing and N850 billion in new external borrowing.
“These borrowings were to part finance the deficit of N2.175 trillion. The House of Representatives may wish to know that the external borrowing from the international capital market increases Nigeria’s external reserve, provide access to low cost and longer tenure bonds as well as avoid crowding out private sector borrowers who may also wish to access the domestic capital market.
‘’However, recent development in the global economic environment as a result of the coronavirus pandemic and decline in oil prices has made it unattractive to borrow from the international capital market at this time.
“To ensure there are adequate funds in finance to finance projects and programmes in the 2020 budget, I hereby seek the House of Representatives approval by way of resolution to raise N850 billion in the new external borrowing in naira from the domestic capital market.
“However, it remain our intention to reassess the international capital market when global conditions improve to refinance this N850 billion new borrowing to optimise the benefit inherent in external borrowing.
“Presently, the conditions in the domestic capital market are favourable with low interest rate. The cost of action is being prudent given our current realities. I have directed the Minister of Finance, Budget and National Planning to make herself available to provide any details or clarification which you may require.
“I trust that this request will be given expeditious consideration to enable us raise N850 billion in new external borrowing from the domestic capital market to part finance the 2020 budget deficit as well as deliver critical projects to the Nigerian people.”
Originally, ,the N850 billion was meant to be borrowed from the international capital market, but the President said this will not be possible now as a result of current economic conditions.