Senate Rejects FG’s $30bn Borrowing Plan, Presidency, DMO Defend Loans

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    Speaker, Gbajabiamila lobby lawmakers on foreign borrowing Ndubuisi Francis, Omololu Ogunmade and Damilola Oyedele in Abuja The Senate yesterday threw out President Muhammadu Buhari’s request to raise $29.9 billion in foreign loans over a three-year period.

    The request was thrown out without being subjected to debate through a voice vote, after the motion for its consideration was moved by the Senate Leader, Senator Ali Ndume. But the belief is that the Senate might have thrown out the request because the executive arm of government has refused to make any commitment on when funds will be disbursed for the constituency projects that are critical to all members of the National Assembly.

    The presidency and Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, however, promptly defended the external borrowing programme, stating that most of the funds would be used to address critical infrastructure gaps in the country and fast- track its march towards economic diversification.

    The Senate, which appeared to have an axe to grind with the president, also rejected the list of ambassadorial nominees he sent to the upper chamber a fortnight ago. After rejecting the list twice through a voice vote, Senate President Bukola Saraki seemed to feel that rejecting both requests from the president in one day would be viewed as an act of bad faith.

    Hence, he overruled his colleagues using his gavel, and consequently referred the list of the nominees to the Senate Committee on Foreign Affairs for screening. Whereas the president’s request for external borrowing had been slated for consideration yesterday, it was a shocked audience that watched the Senate reject the motion by Ndume for its consideration.

    The rejection prompted Saraki to subject the request to a voice vote for a second time and again it was rejected, following which it was thrown out. No reason was given for the rejection at the plenary, but Ndume, while briefing newsmen thereafter, said the request was rejected on three technical grounds. According to him, the rejection was caused by the sloppiness on the part of the executive, explaining that whereas the president had said in his letter that details of the borrowing plan were attached to his letter, it was not attached after all.

    The president had in the introductory paragraph of his letter said: “I wish to refer to the above subject and to submit the attached draft of the federal government 2016-2018 External Borrowing (Rolling) Plan for the consideration and early approval by the National Assembly to ensure prompt implementation of the projects.” However, Ndume said the “attached draft” of the borrowing plan, which the president said he was submitting along with the letter, was not submitted as stated.

    The second reason given by Ndume for the rejection was the absence of details on the borrowing plan, which he said ought to have included “when” and “how” the loans would be obtained.
    Ndume also said the Senate rejected the request because the president wanted an anticipatory approval for the loans, which he said the Senate lacked the power to do.

    The president’s request for anticipatory approval by the Senate was contained in the last paragraph of his letter.

    The president stated: “Given the emergency nature of these facilities and the need to consolidate the peace and return the region to normalcy and considering the time it will take to get National Assembly’s approvals, it has become inevitable to request for the NASS’ leadership approval, pending the consideration and approval of the 2016-2018 borrowing plan by the National Assembly to enable us disburse these funds immediately.” However, Ndume who said he was shocked by the rejection, said despite the observations, the issues would be looked into and the borrowing plan would be re-presented to avoid throwing “the baby away with bath water”.

    He said perhaps the story would have been different if he had a premonition ahead of the presentation, adding that it would have prompted him to lobby his colleagues.

    Buhari on Tuesday, October 25, sought the approval of the National Assembly on the $29.9 billion external loan, which translates to over N9 trillion. The president in the letter had indicated that the $29.96 billion would be for proposed project and programme loans of $11.274 billion, $ 10.686 billion for special national infrastructure projects, Eurobonds of $4.5 billion, and federal government budget support of $3.5 billion.

    Some of the funds from the external borrowing plan would be deployed to emergency projects in the North-east, particularly following the recent outbreak of polio after the de-listing of Nigeria from polio endemic countries. Enang: Executive to Provide Details But in his reaction to the rejection of the president’s request, the Senior Special Assistant to the President on National Assembly Matters, Senator Ita Enang, said yesterday that the presidency had received the news of the “suspension” of the borrowing plan and consequently, the Debt Management Office (DMO), Minister of Budget and Planning, Udoma Udo Udoma, and his Finance counterpart, Kemi Adeosun, had begun to gather the information needed by the Senate for the approval process.

    He stressed that the executive arm of government was not at war with the upper chamber, and that the presidency would engage the Senate by providing all the needed documents and materials for the approval of the loans.

    Senator Enang said: “We are not in dispute with the Distinguished Senate. There is certain information which will enable them to consider in detail and appropriately approve the request of Mr. President. “So we are collating that information, the Budget Office of the Federation, the Debt Management Office, the Minister of Budget and National Planning, Minister of Finance and the economic team; they are collating the information so that it can be submitted to the Senate to enable them take appropriate decision.” DMO Defends Foreign Loans However, just before the Senate threw out the three-year external borrowing plan, the Director General of the DMO yesterday provided further insight into the proposed foreign loans.

    Speaking on Channels Television’s current affairs programme, Sunrise Daily, Nwankwo explained that the loans would help in addressing the biting infrastructure deficit in the country. “When you are in this kind of economic situation, you have to decide where you want to start addressing the problem.

    You then come to the conclusion that the most critical point to start is to deal with the infrastructure problem. “If you deal with infrastructure problem, the cost of power will be lower, the cost of transportation will be lower, and the cost of most other services will be lower,” he said.

    According to him, one of the features of the proposed borrowing plan is the low concessionary nature of most of the loans, with an average interest rate of 1.5 per cent. This arrangement, he explained, differs from previous loan arrangements with the Paris Club of creditors, which came with floating interest rates as high as 18 per cent.

    He also explained that the facilities would help to revive infrastructure like the railways which would ease the movement of heavy goods across the country. Tackling infrastructure deficit, he argued, would force down the cost of goods and services in the long run, explaining that the development would have a significant impact on price levels in the economy.

    “That impacts the economy by bringing down the general price level, (they call it the consumer price index, which is a classical measure of the price level and the rate of inflation.) “When you do this, the Central Bank of Nigeria will set the monetary policy rate low, because all over the world, the central bank knows it has to keep the monetary policy rate high enough to catch up with the inflation rate, otherwise we will be talking of negative real rate of interest which destroys the economy.

    “So the way to go about it is that you have adequate infrastructure — power, road, transportation, ICT. All these make the cost of production in the economy much lower and when this happens, the cost of goods and services will be lower and then inflation will start coming down. “And if inflation comes down, the monetary policy rate will be lower and this will translate to a lower lending rate. That is the sequence,” Nwankwo explained.

    He also dismissed the misconception that the debt sustainability report released by his agency last week had advised the federal government not to borrow in excess of $22 billion over the three-year period, stating that this was misrepresented by a newspaper report (not THISDAY).

    He said what the debt sustainability report published by the DMO said was that the government should not borrow more than $22 billion per annum, thus giving it sufficient headroom for the medium-term $29.96 billion external borrowing plan.

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