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From Ndubuisi Orji and Adesuwa Tsan, Abuja
The Senate and the House of Representatives have approved President Bola Tinubu’s request for $2.3 billion fresh borrowing and issuance of $500million debut Sovereign Sukuk.
Both chambers also approved the new loans request consisting of $1,229,113,000 new external borrowing at the exchange rate of $1 to N1,500 and $1,118,352,000 for refinancing of Eurobonds due to mature on November 21.
Senate’s approval followed the consideration of a report laid by the chairman of the Committee on Local and Foreign Debts, Wamakko, Magatarkada Aliyu, on “New External Borrowing and Refinancing” during plenary on Wednesday.
The request was first read on the floor of the Senate on October 8, seeking for new external borrowing and debt.
Commenting on the report, Chairman of the Senate Committee on Finance, Sani Musa urged his colleagues to support the approval as it has been captured in the fiscal document of the Federal Government. “It is very needful that we give approval to this request so that the 2025 appropriation will be given the necessary funding.”
Chairman of the Senate Committee on Banking, Adetokunbo Abiru, said there was nothing new in the request other than to ensure compliance with the revenue framework.
Similarly, approval of the foreign loans request in the House of Reps followed the consideration and adoption of the recommendations of the Committee on Aids, Loans and Debt Management at the Committee of Supply jointly chaired by the Speaker, Tajudeen Abbas and Deputy Speaker, Benjamin Kalu, on President Tinubu’s request for fresh borrowing.
The report, which was laid before the House on Tuesday recommended that the House approves the “implementation of the New External Borrowing of N1,843,669,786,987.16 (equivalent of $1,229,113,000 at the budget exchange rate of $1/N1,500) provided as new external borrowing in the 2025 Appropriation Act, to part-finance the budget deficit of N9,276,348,934,935.79.
“Refinance the $1,118,352,000 Eurobonds (7.625% $1.118BN NOV 2025) maturing on November 21.
“Access aggregate external capital of $2,347,465,000 ($1.229BN and $1.118BN), through any of the following option(s) in the international capital market (ICM): Issuance of Eurobonds, Loan Syndications, Bridge Finance Facility from Bookrunners and Direct Borrowing from international financial institutions; and issue a stand-alone debut Sovereign Sukuk of up to $500 million in the ICM with or without credit enhancement (Guarantee).”
Prior, to the consideration of the report, the speaker lampooned the deputy House leader, Abdullahi Halims, over his motion for the House to step down the issue for further consideration.
Ironically, the Deputy House Leader, who stood in for the House Leader, Julius Ihonbvere, minutes earlier had moved for the House to revert to the Committee on Supply for the consideration of the Committee report on the president’s loan request.
However, as soon as Abass and Kalu took their seats to begin the consideration of the committee report on the fresh borrowing, the Deputy House Leader said: “It is my candid opinion sir, that we step this down for further consultation. Thank you, your excellency.”
However, the speaker, irked by the motion, said: “It is very unbecoming of you, as a leader, to speak on a subject that is not mutually agreed. I am really not happy with your comments. I will urge you to withdraw that.”
Halims, in compliance with the request of the speaker, promptly responded. Thank you, your excellency, I withdraw the motion.”
Thereafter, the House at the Committee of Supply, considered and approved the four recommendations in the report on President Tinubu’s request for fresh foreign borrowing.
President Tinubu had, in a letter to the speaker, which was read on the floor of the House, on October 7, sought for the approval of the parliament for $1,229,113,000.00 new external borrowing, at the exchange rate of $1 to N1500 and $1,118,352,000.00 for refinancing of Eurobonds due to mature on November 21, as well as the issue of a stand alone “debut Sovereign Sukuk” of up to $500 million in the ICM.
According to the President, “the 2025 Appropriation Act provides for N9,276,348,934,935.79 as new borrowings to part-finance the 2025 budget deficit, of which N1,843,669,786,987.16 (equivalent of about $1,229,113,000 at the budget exchange rate of $1/N1,500) is specified as new external borrowing.
“The House of Representatives is kindly invited to issue its resolution allowing the government to raise the amount through any of the following options: issuance of eurobonds, bridge finance facility from book-runners, loan syndication and direct borrowing from international financial institutions. “The House of Representatives may wish to note that eurobonds of $1,118,352,000 issued in the ICM on November 21, 2018, with an original tenor of seven years, will mature on November 21, 2025.
“The plan is to refinance the maturing eurobonds through issuance of eurobonds, bridge finance facility from book-runners, loan syndication, or direct borrowing from international financial institutions, if necessary to avoid default…
This is a standard practice in debt capital markets, including the ICM. The proposal is for the House of Representatives to issue its resolution authorising the FGN to refinance the eurobonds, accordingly.”
Furthermore, he explained that, “the aggregate amount proposed to be raised in the ICM either through issuance of eurobonds, bridge finance facility from book-runners, loan syndication and direct borrowing from international financial institutions or combination of the options for which resolution of the House of Representatives is being sought is $2,347,465,000.
“While exploring all the options, the plan is to focus on the issuance of eurobonds, and we believe that Nigeria, being a regular issuer of eurobonds in the ICM could raise the proposed amount, subject to market conditions. The House of Representatives may wish to note that because eurobonds issuance is a market-based transaction, the terms and conditions can only be determined at the time of the transactions, and they will be subject to prevailing market conditions.
“The Federal Ministry of Finance (FMF) and the Debt Management Office (DMO) will work with the Transaction Advisers to secure the most favourable terms and conditions.
“Meanwhile, it is expected that the pricing of the new eurobonds will reflect the yields on Nigeria’s eurobonds trading in the ICM at the time of issuance, while tenors will be guided by investors’ preferences, price and the DMO’s liability management strategy.”
President Tinubu, while rationalising his request for the approval for the issuance of $500 million sovereign Sukuk, explained that the Federal Government has recorded success in issuance of Sukuk in the domestic capital market for the financing of critical infrastructural projects across the country.
“Between September 2017 and May 2025, the DMO has raised N1,392.557 trillion through Sukuk in the domestic capital market to fund critical road infrastructure projects. There is the need to pool resources from external sources to complement domestic issuance to help bridge infrastructure funding gaps; and “It is imperative to open new sources of funding for the FGN, thereby diversifying investor base, as well as deepening the FGN securities market.
“The proposal is for the House of Representatives to approve the issuance of a stand-alone debut Sovereign Sukuk with or without credit enhancement (Guarantee) from the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IsDB) Group.
“The Policy Premium for the Guarantee proposed by ICIEC is 3.5 percent of issue amount per annum. If the credit enhancement from ICIEC is taken for the proposed Sukuk issuance, 25 percent of the issue proceeds may be used to repay relatively more expensive debt obligations of the FG, and the balance will be used to finance the development of pre-identified infrastructure projects,” he stated.
