Nigerian Upper Chamber has approved President Bola Tinubu’s request for an external loan of N1.77 trillion ($2.209 billion) to help cover the 2024 budget deficit. The loan, submitted by the President, is part of a broader plan to finance a N9.7 trillion budget deficit for the upcoming fiscal year.
President Tinubu requested the National Assembly to approve a new external borrowing plan of N1.767 trillion, or $2.209 billion, to be included in the 2024 Appropriation Act. The loan was approved after the Senate reviewed the report from its committee on local and foreign debt during a plenary session. The funds will contribute to financing the N28.7 trillion 2024 budget, as outlined in the Appropriation Act.
The new loan is expected to increase the Federal Government’s debt servicing costs. The Central Bank of Nigeria recently reported that the government spent $3.58 billion on servicing foreign debt in the first nine months of 2024, highlighting the growing burden of debt obligations.
The external loan will be raised through the country’s Eurobonds in international capital markets, as well as gains from financial laws. Depending on the Eurobond issuance terms and market conditions, the funds are anticipated to be raised at relatively lower interest rates compared to the federal government’s domestic borrowing rates. The loan will be sourced at the official exchange rate of $1.00/N1,640 and will be used to fund capital projects outlined in the 2024 budget.
Aliyu Wamakko, chairman of the committee, emphasized that the government requires the funds to complete ongoing projects and programs in the budget. He further noted that issuing the bonds will support the Debt Management Strategy, which aims to reduce borrowing costs, extend the maturity of public debt, create room in the domestic market for other borrowers, and boost Nigeria’s external reserves.
He further stated that if the issuance of the Eurobonds is delayed due to market conditions, the Nigerian government will turn to bridge financing or syndicated loans. The Senator assured that the National Assembly would work closely with the Ministry of Finance to ensure the funds are properly utilized once sourced. He ultimately recommended the approval of the president’s request.
