In a significant move, the Senate has granted approval to President Bola Tinubu’s request for a $500 million loan designated for the Bureau of Public Enterprises (BPE).
This loan aims to facilitate the metering of citizens, thereby enhancing the financial and technical performance of electricity distribution companies.
The approved loan, known as the Nigeria Distribution Sector Recovery Program (DISREP), is part of the World Bank’s financial package amounting to $500 million.
The decision to grant approval was made following the review of the report presented by Senator Aliyu Wammako, who leads the Senate Committee on Local and Foreign Debts.
During the presentation of the report, Senator Haruna Manu, the Vice Chairman of the Committee, emphasized the importance of the loan for the BPE. He underscored the Senate’s approval of the $500 million allocation as a crucial step in ongoing negotiations for external borrowing.
This $500 million loan is a fraction of the larger $7.94 billion loan request submitted by President Tinubu under the 2022-2024 external borrowing plan. The President had also sought approval for an additional €100 million.
However, the Senate previously granted approval for the borrowing of $7.4 billion during a special plenary session held on December 30, 2023.
Senator Manu reiterated that the terms and conditions of the loan agreement will prioritize Nigeria’s economic growth and uphold the nation’s sovereignty.
Presenting the report, Manu said that “The Senate of the Federal Republic of Nigeria will recall that at the Plenary on November 1st 2023 a communication from Mr. President requesting for the approval of Federal Government 2022 – 2024 External Borrowing Plan was read.
“The External Borrowing (Rolling) Plan contain a request for approval of $7,944,508,559.00 and Euro 100,000.000 as grant component.
“The communication and the attached scheduled was referred to the Committee on Local and Foreign Debt for further legislative action.
“A report (No.1) of this Committee recommending the approval of $7,444,508,559.00 and £100,000,000.00 out of the proposed total facility of $7,944,508,559.00 was laid before the Senate and was considered on 30th December, 2023.
“The Committee deferred consideration on the proposed project and amount for Bureau of Public Enterprises due to the agency’s failure to appear before the committee to defend the proposed project for their agency as captured in the External Borrowing Plan.
“Following the resumption of the Committee’s consideration of the outstanding request, and after legislative interactions, deliberations, and due diligences, the committee hereby submit its report and sought for the approval of the recommendation therein.
“The request of Mr. President is in compliance with the provisions of the Debt Management Office (Establishment) Act 2003 (DMO) and the Fiscal Responsibility Act 2007 (FRA) which both enjoin the President to seek and obtain the approval of the National Assembly in respect and also obligates the National Assembly to decide on the request by a resolution.
“The provisions of the above statutes together with the revised guidelines for External and Domestic Borrowing issued by the DMO pursuant to its powers under the DMO Act, requires that all Tiers of Government of the Federation shall borrow only under the following conditions: Shall specify the purpose for which the borrowing is intended which shall only be for long term Capital Expenditure and Human Capital Development. Such borrowing shall be on concessional terms with low interest rate and with a reasonably long amortization period. Shall present a cost benefit analysis detailing the economic and social benefit of the purpose for which the intended borrowing will be applied.
“Shall provide satisfactory proof of the existence of prior authorization in the Appropriation Law for the purpose for which the borrowing is to be utilized. Such borrowing shall have the Approval of the relevant Executive Council. Such borrowing shall be approved by a Resolution of the relevant Legislative Assembly. Such External Borrowing shall be executed for and on behalf of the Federal Government by the Minister of Finance or any other person the Minister may designate in writing.
“Financial Institutions and Development agencies are required by the above Statutes to request and obtain proof of compliance with the provisions of Part X of the Fiscal Responsibility Act before lending to any Government in the Federation.That our debt service figures constitute a huge drain on our revenue to the extent that it account for over 30% of our expenditure in the annual budget.
“That due to the shortfall in our annual revenues in relation to our need for rapid infrastructural and human capital development, we have had to pass deficit budget every year, requiring us to borrow to finance the deficit in our budget.
“That total borrowing request of $7,944,508,559 of which Mr.President is seeking approval of National Assembly is proposed to be borrowed from various financial institutions. That the program development objective of this project is to improve financial and technical performance of Electricity distributions companies.”