President Muhammadu Buhari has explained that the COVID-19 pandemic and the fall of oil price in the international market has made borrowing from the international capital market unattractive.
Buhari explained this in a letter to the House of Representatives, saying he was constrained to ask the House to grant him approval to borrow N850 billion from the domestic capital market to finance deficits in the 2020 budget.
Buhari said that the N850 billion which was initially scheduled in the budget to be borrowed from the international capital market, was not possible now as a result of current global economic conditions.
In the letter, President Buhari noted that external borrowing from the international capital market will increase Nigeria’s external reserves.
He 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 was 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.’
“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 borrowing 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 programmes in the 2020 budget, I hereby seek the House of Representatives approval by way of resolution to raise N850 billion in naira from the domestic capital market.”