In the letter dated October 4, 2017, Buhari referred the Senate to the 2017 budget, with a deficit of N2.356tn and provision for new borrowing of N2.321tn.
He said the Act also provided for domestic borrowing of N1.254tn and external borrowing of N1.067tn (about $3.5bn).
At the session on Thursday, the Chairman of the Senate Committee on Local and Foreign Debts, Senator Shehu Sani, asked Oniha to provide details of the proposed loans, including the rate and tenure.
In her response, Oniha said, “In terms of tenor, from the figures that distinguished senators have reeled out, we have them in various tenors. What you do is at the time you get to the market and you want to price, you will be more certain about the price. It could be anywhere from five to 30 years.
“On borrowing, when the current generation may not be around at that time (payment completion), the truth is that if we are borrowing in the long term, we are using it to finance capital projects, which are also long-term (projects) and the benefits of those projects are also long-term (benefits).
“I believe that some of the roads and even institutions like some universities that we see today were built before some of us were born. We should look at it this way; that the benefits are also long-term (benefits).”
She also responded to the question on whether the development of the first generation infrastructure in the country was funded with loans, saying, “I can remember that the Federal Government issued development loan stocks under the first plan and some are actually yet to mature. Those development loan stocks were what the Federal Government used in the 60s and maybe early 70s. I know that some of them had 20 to 22 years’ maturity. At the time, they appeared to be very long. This is not the first time that the government is borrowing on a long-term basis.”
The DMO boss further explained that out of Nigeria’s debt current stock of N19tn, 77 per cent was from the domestic market through the various products issued, including Treasury bills, the Federal Government of Nigeria Bonds, the Federal Government Savings Bonds and the recent Sukuk.
“The implication of having that large amount in domestic debt is high debt service because the costs of – meaning interest rates – are high. If the government is so visible and prominent in the local market, it means that we have taken some of the money that should go to the private sector.
“Banks should be able to have large amounts of money to extend to the real sector. If we are not too prominent in the domestic market, there should be more room for banks and other financial institutions to lend to the private sector and, thereby, contributing to economic growth.”
In a statement made available in Abuja on Thursday, the DMO said $2.5bn of the proposed external borrowing would be used to finance some projects while $3bn would be used to refinance some domestic debts.
The DMO said, “The first component of $2.5bn represents new external borrowing provided for in the 2017 Appropriation Act to part finance the deficit in that budget.
“It will be recalled that the 2017 Appropriation Act provided for new external borrowing of N1.067tn or $3.5bn at an exchange rate of USD/N305.
“Out of this amount, $300m has been raised through a Diaspora Bond that was issued in June leaving a balance of $3.2bn out of which $2.5bn is to be sourced through a Eurobond issuance.
“The $2.5bn proposed Eurobond will be used to finance critical road and rail projects included in the 2017 Appropriation Act.
In his presentation, the Minister of Transportation, Rotimi Amaechi, said Nigeria would borrow more to finance ongoing rail projects.
According to him, the country needs $36bn to complete the projects.
He said, “What is in this (2017) budget that we are asking for now is Kano-Kaduna and Port Harcourt-Calabar, but the bank that is lending us money will prefer if we ask for Ibadan-Kano so that we can finish the whole stretch from Lagos to Kano.”
When asked which particular rail projects the loan would be used to finance, Amaechi said, “It depends on what they do with the virement; it will affect a lot of the funding. This money we are asking for will fund the completion of the Itakpe-Warri line; that will be ready in June next year. It will also fund the Kano-Kaduna and Port-Harcourt-Calabar (rail lines).”