President Tinubu Seeks Approval for New External Borrowing to Fund 2024 Budget Deficit

President Bola Tinubu has formally requested the National Assembly’s approval for a new external borrowing of N1.77 trillion (approximately USD2.21 billion) as outlined in the 2024 Appropriation Act. The funds aim to address the budget deficit and finance critical projects across priority sectors of the Nigerian economy.

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Details of the Borrowing Request

In a letter dated November 15, 2024, and read by Speaker Tajudeen Abbas on November 19 during plenary, President Tinubu cited compliance with Sections 21(1) and 27(1) of the Debt Management Office (DMO) Act, 2003, and the Federal Executive Council’s approval.

The President stated:

• Budget Deficit Funding: The borrowing of N1.77 trillion will partially finance the N9.179 trillion budget deficit approved in the 2024 Appropriation Act.
• Subdivisions: The total N7.828 trillion in new borrowings includes N6.061 trillion in domestic loans and N1.767 trillion in external loans.

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Funding Plan

The borrowing will be raised through three primary channels:

1. Issuance of Eurobonds: Nigeria will leverage the International Capital Market (ICM), where it has previously raised USD16.92 billion. The Eurobond market offers quick access to funds and potentially lower borrowing costs.
2. Debut Sovereign Sukuk: A debut issuance of up to USD500 million is planned, supported by the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC).
3. Bridge Finance/Syndicated Loans: This option, led by prominent financial institutions such as Citigroup, JP Morgan, and Standard Chartered, will act as a contingency if Eurobond issuance faces delays due to market conditions.

The President emphasized that all options would be evaluated simultaneously to ensure optimal costs and benefits. However, priority will be given to Eurobond issuance, given its faster execution and higher potential returns.

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Utilization of Funds

The proceeds will be allocated to key sectors, including:

• Power and energy projects
• Transport infrastructure
• Agricultural initiatives
• Defense and security operations

Additionally, the funds will boost Nigeria’s external reserves through deposits in the Central Bank of Nigeria, providing further support for the naira exchange rate.

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Terms and Conditions

The President assured the House that the Federal Ministry of Finance and the Debt Management Office (DMO) would work with transaction advisers to secure the best possible terms based on prevailing market conditions. The final terms, including interest rates and tenors, will be determined during issuance.

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Resolution Required from the National Assembly

To implement the borrowing plan, the National Assembly’s resolution is needed to:

1. Approve raising N1.77 trillion through one or more sources (Eurobonds, Sovereign Sukuk, or Bridge Finance).
2. Authorize the issuance of up to USD2.21 billion in Eurobonds, as provided in the 2024 Appropriation Act.
3. Empower the Minister of Finance and the DMO to execute necessary actions to facilitate the borrowing process.

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Key Takeaways

President Tinubu’s request highlights Nigeria’s strategic approach to securing funds for development while maintaining fiscal discipline. The administration aims to address critical infrastructure gaps and stabilize the economy through these external loans.

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