New $2.209 billion loan: mixed reaction to Tinubu government’s borrowings

On Tuesday, November 19, President Bola Tinubu submitted a request to the National Assembly for approval to receive a new external loan of $2.2 billion.

This followed the Federal Executive Council’s approval of the borrowing plan on November 10.

According to the President, the loan will be used to finance the 2024 budget deficit of N9.7 trillion.

The letter to the National Assembly read in parts: “Request for a resolution of the National Assembly to implement new external borrowings amounting to N1,767,102,179, which is about $2.209 billion already enshrined in the 2024 Appropriation Act.

“In accordance with the provisions of Sections 21 and 27 of Subsection 1, the Debt Management Authority has enacted the 2003 Act and with the approval of the Federal Executive Council, I am writing to request the adoption of a resolution of the National Assembly to collect the sum of $2.2 09 billion.

“New foreign borrowing enshrined in the 2024 Appropriations Act partially financed the budget by approximately $9.17 trillion.

“Please receive the MTF and FSP for 2025-2027 approved at the Federal Executive Council meeting on November 10, 2024.

“The Senate is invited to note that since the 2025 budget of the Federal Government of Nigeria will be prepared based on the parameters and financial assumptions of the approved MTF and FSP for 2025-2027, it is imperative that urgent legislative action be sought by the National Assembly in this submission.”

Soon after the request was made public, Nigerians began voicing concerns, especially as the 2024 budget, partly financed by debt, ends next month.

However, despite the concerns expressed by the vast majority of Nigerians, the National Assembly promptly gave its approval for the loan, as requested by the President.

The approval came 48 hours after President Tinubu sent a letter to the two chambers of the National Assembly on the new foreign loan, which he said was already enshrined in the 2024 Appropriation Act.

The Senate, in plenary session, received and considered the report of its Committee on Local and Foreign Debt, which was tasked with working at the direction of the President.

The report was presented by the Committee Chairman, Aliyu Wammako (APC-Sokoto).

Presenting the committee’s report, Vammako noted that the President’s request was very necessary for approval.

He said the loan request will be used to implement ongoing projects and programs under the 2024 Appropriations Act, stressing that these projects are critical to national growth and development.

“This will facilitate the implementation of a debt management strategy that aims to reduce borrowing costs. This will extend the maturity of government debt, free up space in the domestic market for other borrowers and help increase Nigeria’s external reserves,” he said.

Wammako said Nigeria could raise all or part of the $2.2 billion by issuing Eurobonds on the International Capital Market (ICM).

The report was then unanimously approved by a yes vote.

Speaking after the endorsement, Deputy Senate President Jibrin Barau (APC-Kano), who presided over the plenary, commended the Wammako-led committee for a job well done.

After the report was presented, it was approved by the senators without controversy.

Likewise, the House of Representatives also reviewed and approved the loan application following the presentation of the report of the House Committee on Relief, Credit and Debt Management in plenary.

Reacting to the approval of the loan, former Vice President Atiku Abubakar said it would put unbearable negative pressure on the economy.

In his statement, Atiku noted that a recent World Bank report indicated that Nigeria is the third most indebted country to the International Development Association (IDA).

He expressed concern over the developments and accused the National Assembly of being complicit in the debt that is already drowning the country.

The statement read: “The recent report released by the World Bank ranking Nigeria as the third-highest country in debt to the International Development Association (IDA) is very alarming.

“This report comes at a time when the government has already sent a proposal to the National Assembly, signaling its intention to borrow an additional N1.7 trillion for the 2024 budget deficit through Eurobonds.

“What makes this particular loan offer even more alarming is that its base exchange rate is US$1 to N800, while the current exchange rate of the Central Bank of Nigeria is over N1,600 to US$1.

“Nigeria is falling deeper into debt and the National Assembly has once again become complicit. In July this year, Tinubu boasted that the Federal Inland Revenue Service, FIRS and Customs under his control had collected record high revenues to fund the budget. Why then are they still borrowing?

“There is something they are not telling Nigerians even though they have been crushed by a combination of failed trial and error policies and credit racketeering.

“These Tinubu loans are crushing Nigerians and putting unbearable pressure on the economy, especially when they are not properly discussed and utilized.”

Atiku further argued that the endless propensity to borrow is due to greed and corruption and not necessarily because they want to develop the country’s infrastructure.

He continued: “It is worrying that the insatiable appetite for these huge loans is driven by corruption rather than by infrastructure and development needs. A report by budget watchdog Budgit said the 2024 budget is a mess because of the amount of pork involved.

“I feel a sense of personal agony to see that just a few years after the administration of former President Olusegun Obasanjo took our country out of foreign debt, today we are once again on top of the same conundrum. It’s time to show more caution and arithmetic regarding the lending madness.”

In response, the President of the Middle Belt Forum, MBF, Dr. Pogu Bitrus, lamented that the external loans received by the country were not for any meaningful projects but for consumption.

He told DAILY POST: “It is very unfortunate that we are financing recurrent and unnecessary expenditure, not even capital projects, with loans from indebted generations yet to be born. It is very unfortunate that Nigeria finds itself in this situation.”

He noted that “if the loan is for capital projects, Nigerians will not worry at all. But not when they are intended for consumption.

“After all the economic problems Nigerians are facing, it is unfortunate that we are still surviving on debt.”

“For example, if we have a project that is capital in nature and that will generate revenue for Nigeria, then we can say that it is worthwhile but in vague terms, such as saying that it is intended to be complementary; what complements?

“We are only increasing Nigeria’s debts and destroying the future of our country. These loans are not needed,” he said.

He suggested that Nigeria should borrow a leaf from countries like India.

He said: “Nigerians just need to learn the same way Indians did. At one stage, India even refused to import drugs, insisting that if Indians could not produce the drugs needed by its citizens, they should be left to die.

“This is how India survived and today is among the developed countries of the world. So, unfortunately, we still have people who think that constantly taking out loans is the way to go; this attitude must change.

“Whatever we have, let’s work with it and develop production until we can survive and export. I think this is the way forward. I no longer support taking loans, because it will be the key to the future of our children.”

In his speech, lawyer and politician Maxi Okwu also condemned the development, saying the country’s growing debt profile should be a source of concern for any sane Nigerian.

He wondered why leaders could not think of how to manage the country’s resources to provide infrastructure but always ran to other countries for loans.

“The worst thing is that the loans are not even for capital projects. They are intended for simple consumption.

“This is quite unfortunate. I don’t even know what to say again. The whole thing is as confusing as it is unfortunate,” he said.