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$6.18bn external borrowing not new – DMO

The Debt Management Office (DMO) has clarified that the new $6.18 billion external borrowing, which President Muhammadu Buhari requested an approval by the National Assembly on Tuesday, is not new, but already captured in the 2021 Appropriation Act.

The president had on Tuesday requested for the resolution of the lawmakers for the implementation of the new external borrowing of $6.183 billion in the 2021 Appropriation Act, saying that the proposed loan – equivalent of N2.34 trillion, would be used to finance the 2021 budget deficit of N5.6 trillion.

The president also explained that the loan would enable the Federal Government to fund critical projects in transportation, health and education, among others.

The clarification, Wednesday by the DMO, followed wide outcry that the president was proposing a fresh loan, amid concerns of mounting debt.

According to the DMO, while its earlier note tried to explain the rationale behind the president’s request and the utilisation of the proceeds, some sections of the public appear to require further clarification.

“The proposed New Capital Raising is the New External Borrowing provided in the 2021 Appropriation Act to part finance the deficit in the Budget. In other words, the New Capital Raising has already been approved in the Budgetary Process by the Executive and Legislative arms of Government,” the DMO said in a statement.

According to the Debt Office, “Mr. President’s request to the National Assembly is to comply with the provisions of Sections 21 and 27 of the Debt Management Office (Establishment, Etc.) Act, 2003.

“The proceeds of the New Capital Raising are to be deployed to capital projects in various sectors of the economy including power, transport, agriculture and rural development, education, health and water resources that are specified in the 2021 Appropriation Act, thus, enabling the implementation of the Act and the achievements of its objectives.”

The Federal Government’s N13.59 trillion planned spending for 2021 contains an overall budget deficit of N5.60 trillion. The deficit, as approved, is projected to be financed through N2.34 trillion domestic borrowing and N2.34 trillion from foreign sources, including multi-lateral/bilateral loan drawdowns of N709.69 billion, as well as privatisation proceeds of N205.15 billion.

Out of the total budget, N5.99 trillion was estimated for recurrent (non-debt) spending; N4.37 trillion as capex; N3.32 trillion for debt service, and N200 billion provision to retire maturing bonds to local contractors/suppliers.

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