Nigeria’s President Buhari has written a letter of an update to the House of Representatives detailing how the global coronavirus outbreak affected the fall of oil prices in the international market, thereby making it unattractive to borrow as this time.
Buhari said this while stating that he was constrained to ask the House of Representative to grant him approval to borrow N850 billion from the domestic capital market to finance deficits in the 2020 budget.
However, President Buhari stated that the N850 billion which was initially drafted in the budget to be borrowed from the international capital market was impossible now giving the global economic condition.
In the letter that was titled “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.” Buhari clarified that external borrowing from the international capital market will increase Nigeria’s external reserves.
He, however, said it would also provide access to low cost and longer tenure bonds as well as avoid crowding out the private sector borrowers who may also wish to access the domestic capital market.
“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 extern borrowing,” the letter said.
“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 reserves, 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 to finance projects and programs in the 2020 budget, I hereby seek the House of Representatives approved by way of resolution to raiseraise N850 billion in naira from the domestic capital market.”