Lagos state has secured approval to get a bridging facility loan offered by the Federal Ministry of Finance, Budget and National Planning for the completion of regional roads in the state as well as that of the Lekki-Epe Expressway project.
The approval was given to Governor Babajide Sanwo-Olu by the state House of Assembly.
Lawmakers, who are currently busy with the budget defence by Ministries, Departments and Agencies (MDAs) of government, had to convene an emergency plenary to grant the Governor’s request.
A total of ₦3,750,000,000 was approved for the regional road project, while ₦15,000,000,000 was for Lekki-Epe Expressway project respectively, bringing the grand total to ₦18,750,000,000.
Speaking on the report, Chairman, House Committee Committee on Finance, Rotimi Olowo, noted that loan facility will carry a five percent interest rate in the first two years and nine percent for the subsequent years, even as a two-year moratorium was given to it.
On his part, the Committee Chairman of Information, Setonji David, equally noted that the loan was a single digit with the repayment period of 30 years, during which the project would drive sustainable economic growth and development in the state.
In his own contribution, Bisi Yusuf said the loan would aid Lekki Free Trade Zone which has become the state’s commercial centre.
Other lawmakers spoke in support of the request, commending the state government being proactive as the move would bring immense infrastructural benefits to the state.
The Senate has approved the Federal Government loan request of 16.2 billion dollars and 1.02 billion euros, under the 2018-2020 eternal borrowing plan.
This followed the adoption of the report of the Senate Committee on Local and Foreign Debt on the 2018-2020 external borrowing (Rolling) Plan at Wednesday’s plenary.
Presenting the report, Chairman of the Committee, Sen. Clifford Ordia (PDP -Edo ), said the President’s request was in compliance with the provisions of the Debt Management Office (Establishment) Act 2003 and the Fiscal Responsibility Act 2007.
“The provisions of the statute enjoins the President to seek and obtain the approval of the National Assembly in respect of the External Borrowing Programme of the Federation and States,” he said.
Ordia said that the committee noted the serious concerns of Nigerians about the level and sustainability of the country’s borrowing in the last decade.
He said Nigeria’s debt profile had continued to rise, reached an all-time high of around 95 per cent of retained revenue and 35 per cent of its annual expenditure.
He expressed concern that the development constituted a drain on the nation’s economy limiting resources available for national development.
Underscoring the need for a more proactive approach to revenue enhancement, the lawmaker observed that “there are noticeable improvements in our revenues but the growth is not sufficient or rapid enough to catch up with the pace of development required for our nation.”
He disclosed that out of over 22.8 dollars billion approved by the National Assembly under the 2016-2018 External Borrowing Plan, only 2.8 billion dollars, representing 10 per cent has been disbursed to Nigeria.
The lawmaker said that the projects, which require additional financing, would have great multiplier effect on stimulating economic growth through infrastructure development, job creation, poverty alleviation, healthcare and improve the nation’s security architecture.
The Fiscal Responsibility Commission (FRC) has notified about 14 banks and financial institutions allegedly granting loans to state governments without due process.
The Executive Chairman of the FRC, Mr Victor Muruako, made reported at a Transparency and Accountability Sensitisation Workshop for the South West in Lagos on Monday that the commission was already engaging with the loan institutions and those proven to be guilty would be sanctioned.
The two-day sensitisation workshop on Fiscal Transparency, Accountability and Prudence at sub-national levels, has as its theme: “Fiscal Transparency and Sustainable Development at the Sub-Nationals.”
The event was organised by the FRC as part of a series of zonal sensitisation campaigns on Transparency, Accountability and Prudence (TAP) in public finance management.
Muruako said the commission was already engaging with the loan institutions and those proven to be guilty would be sanctioned.
Although he declined to name the banks and institutions involved, the FRC boss said the commission was still engaging them on the issue.
According to him, there are conditions that must be met by states before they can be granted loans.
“Banks and other financial institutions that make themselves willing tools of fiscal carelessness by granting loans to some sub-national governments without regard to due process will be sanctioned.
” Issues of loans, borrowing and indebtedness are in the Exclusive List in the 1999 Constitution of the Federal Republic of Nigeria (as amended).
“Section 45(2) in Part X of the Fiscal Responsibility Act 2007, specifies conditions for borrowing by “any government in the Federation or its agencies and corporations.
“Lending by banks and financial institutions in contravention of this Part shall be unlawful,” he said.
He said subnational governments should not make loans their first and last consideration for meeting revenue shortfalls but should consider ways of harvesting their dormant potentials for Internally Generated Revenue (IGR).
”In line with the foregoing, the commission hereby serves notice to defaulting banks and other financial institutions that the window of just using moral suasion is closing.
“Going forward, we intend to invoke the provisions of the law against this expressly defined unlawful act, wherever it rears its head.
“Where the Fiscal Responsibility Act (FRA) 2007 appears inadequate to compel, we shall aggressively invoke our collaborations with sister agencies such as the ICPC and EFCC.”
He pointed out that even the ‘bailout loans,’ by the Federal Government to states carried a conditionality that benefiting states should commit to a Fiscal Sustainability Plan (FSP) consisting of 22 actions grouped under five objectives
“The objectives are improve accountability and transparency, increase public revenue, rationalise public expenditure, improve public financial management and sustainable debt management.”
Also speaking, Mr Abdulrasheed Bawa, Chairman of the Economic and Financial Crimes Commission (EFCC), said states should domesticate the fiscal responsibility act.
Bawa, who was represented by Mr Emeka Okonjo, Deputy Zonal Commander of the EFCC, Lagos State, said states must take accountability and transparency seriously.
In his submission, Mr Toyin Raheem, Chairman, Coalition Against Corruption and Bad Governance (CACOBAG), lamented the inability of some stated to domesticate the FRA.
Raheem who spoke on behalf of civil society groups, said that concern on corruption remained a duty for all Nigerians.
“To build a stronger Nigeria, we must all be involved in issues of governance and demand explanations from our leaders on funds and how they are spent.”
The Arewa Traders’ Association of Nigeria has appealed to the Federal Government to grant them soft loans, similarly to that of the Rice Farmers Association of Nigeria (RIFAN), for the socioeconomic development of the country.
Alhaji Ibrahim Mohammed, National President of the association, made the plea in an interview with newsmen, shortly after he was inaugurated as the association’s new President on Thursday, in Yola.
He said that the loans would help reduce the rate of poverty, unemployment and insecurity in general as a lot of the youth would be empowered.
“Definitely, Federal Government is empowering Nigerians online, but 70 per cent of our members have not been accessing it because they are not educated.
“We are urging the federal government to look for another alternative, through the leadership, like that of RIFAN who were being given funds disbursed to their members,” he said.
The president also urged Northern Governors to create a means of empowering traders for the socioeconomic development of their respective states, as this would reduce the rate of unemployment, especially at the grassroots.
He further urged for more support from members and assuring that he would bring a lot of development that would impact positively on their lives and development in the country at large.
The Bank of Industry (BoI) has secured a N1 billion syndicated loan to support Micro, Small and Medium Enterprises (MSMEs) in Nigeria.
The facility obtained with the support of the ministry of trade and industry, has a long-term tenor, alongside moratorium benefits.
Mr Adeniyi Adebayo, Minister of Industry, Trade and Investment disclosed this, on Monday, at the Quantum Mechanics Limited MSMEs Survival Fund capacity building programme in Abuja.
Mr Adebayo in a statement by Ifedayo Sayo, his Special Assistant on Media, said the loan would improve the capacity of the bank to effectively support MSMEs across key sectors of the Nigerian economy.
Mr Adebayo said the loan facility, being implemented in conjunction with international partners, had a long-term tenor, alongside moratorium benefits.
According to him, this is part of its efforts toward economic recovery and sustainable growth.
“There is an ongoing discussion with Dunn and Bradstreet to establish an SMEs Ratings Agency of Nigeria (SMERAN) to provide an empirical basis toward analysing the eligibility of SMEs to access credit,” he said.
The minister, who spoke on efforts of the Federal Government to support MSMEs in the country, also reiterated the ministry’s support to MSMEs development as demonstrated by the MSMEs Survival Fund Initiative, launched in the wake of COVID-19 pandemic by the Federal Government as part of its Nigerian Economic Sustainability Plan (NESP).
NESP is aimed at protecting MSMEs businesses from the shocks of the pandemic, he said.
“The fund comprises the Payroll Support Scheme which aims at supporting MSMEs in meeting their payroll obligations and safeguard jobs by paying up to N50,000 to a maximum of 10 employees for three months.
“The Artisan and Transport Grant supports self-employed artisans with a one-off payment of N30,000 targeting 333,000 individuals.
Nigeria’s $1.5 billion budget support loan request is “still in the works”, says Shubham Chaudhuri, World Bank Country Director for Nigeria.
Chaudhuri said in Abuja, at a media conference on the presentation of the World Bank Nigeria Development Update (NDU) for December.
The report titled “Rising to the Challenge: Nigeria’s COVID response” took stock of recently implemented reforms and proposes policy options to mitigate the impact of COVID-19 and foster a resilient, sustainable and inclusive recovery.
Chaudhuri said that the loan request was taking so long because, irrespective of the bold actions taken by the government in the form of reforms to cushion the effects of the pandemic, the bank still had its reservations.
“I think the way that our board and our shareholders have approached this budget support, is really to say has the country that is requesting the support done all it can to help itself?
“Think of it this way, when you have to say a 10 or 15 billion dollar hole, 1.5 billion dollars is just a little bit of that, the question is, how is the rest of that hole being made up?
“What is the sustainability in 2021 and beyond? And that is why we are thinking about the overall prospects going forward, in terms of the macro adequacy and the flexibility and exchange rate management.
“That is why our shareholders and our management are still saying we recognise how much Nigeria has done, but for this 1.5 billion dollars to really be a part of the larger effort to put Nigeria on a sound macro-fiscal footing going forward, there needs to be a little bit more.”
Chaudhuri, however, said that the 1.5 billion dollars slated for presentation to the Bank’s board for approval on Dec. 14 was not the 1.5 billion dollars for budget support, but two separate 750 million dollar credit to support state government efforts.
He added that one of them was for the state’s fiscal resources, but under a performance based mechanism.
“So, one is additional financing for the State’s Fiscal Transparency Accountability and Sustainability (SFTAS) programme for results.
“The other is the Nigeria COVID-19 Action Recovery and Economic Stimulus (CARES) Programme, which is meant to support the states towards protecting livelihoods, enhancing food security and supporting local economic activity.
“So those are the two operations that are being considered by our board on Monday.”
As for the bank’s portfolio investment in Nigeria, he said after the 1.5 billion dollars states support credit, it would amount to 11.5 billion dollars.
Giving a breakdown, he said there were three different ways of measuring the size of the bank’s portfolio, first was how much concessional financing was being provided.
“Yes, we are providing credits and not grants to support the government’s budget, but it is highly concessional, usually 20-30 years maturities, 10 years grace period and at highly concessional rates of about 1 to 2 per cent.
“So if you look at how much of that the board has approved, in terms of this financing, the board has as of July 2018 approved seven billion and in the last two years up to now, it has approved another three billion in financing so that brings us to 10 billion dollars and then the 1.5 billion dollars that is being considered in December that will bring us to 11.5 billion dollars the board has approved.”
The World Bank chief said that in active disbursements, the bank had disbursed seven billion dollars as at July 2018.
He added the bank’s board, in July, also approved 500 million dollars for the Adult and Girls Initiative for Learning and Empowerment (AGILE) programme, under the Global Financing Facility.
The attention of the Debt Management Office (DMO), has been drawn to statements and reports credited to several persons on the subject of Loans obtained from China and has considered it necessary to provide a sequel to its Press Release on the same subject dated September 11, 2018.
The general public is encouraged to be guided by the facts in this Press Release.
How Much Loan has Nigeria Taken from China?
As at March 31, 2020, the Total Borrowing by Nigeria from China was USD3.121 billion. This amount represents only 3.94% of Nigeria’s Total
Public Debt of USD79.303 billion as at March 31, 2020. Similarly, in terms of external sources of funds, Loans from China accounted for 11.28%
of the External Debt Stock of USD27.67 billion at the same date. These data, show that China is not a major source of funding for the Nigerian
What are the Terms of the Loans from China?
The Total Borrowing from China of USD3.121 billion as at March 31, 2020, are concessional Loans with Interest Rates of 2.50% p.a., Tenor of Twenty (20) years and Grace Period (Moratorium) of Seven (7) years. The Terms and other details of the Loan are available at http://www.dmo.gov.ng./
These Terms are compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007. In addition, the low interest rate reduces the Interest Cost to Government while the long tenor enables the repayment of the principal sum of the Loans over many years. These two benefits, make the provisions for Debt Service in the
Annual Budget lower than they would otherwise have been if the Loans were on commercial terms.
*What Were the Loans Used For?
The USD3.121 billion Loans are project-tied Loans. The projects, (eleven – 11 in number as at March 31, 2020), include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project
2(Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project.
See a Full List of the Projects at http://www.dmo.gov.ng./
The impact of these Loans is not only evident but visible.
For instance, the Idu – Kaduna Rail Line has become a major source of transportation between Abuja and Kaduna. Also, the new International Airport in Abuja, has improved air transportation for the populace,
while the Lagos – Ibadan rail line when completed, will ease traffic on the busy Lagos -Ibadan Expressway.
The projects also have the added benefits of job creation, not only by themselves but through direct and indirect service providers, a number of which are Small and Medium Enterprises. It is widely accepted that investment in infrastructure is one of the most effective tools for countries to achieve economic growth and development. Using Loans from China to finance infrastructure is thus in alignment with this position.
What Is the Process by which the Loans were Obtained?
The principal process and requirements for borrowing by the Government are expressly stated in the Debt Management Office Establishment (ETC) Act, 2003 (DMO Act) and the Fiscal Responsibility Act, 2007. Section 21 (1) of the DMO Act, “No External loan shall be approved or obtained by the Minister unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution” and Section 41 (1a) of the FRA, “Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low interest rate and with a reasonable long amortization period subject to the approval of the appropriate legislative body where necessary”, are instructive in this regard.
For detailed information on the borrowing process and required approvals please go to “External and Domestic Borrowing Guidelines for Federal Government, State
Government and the Federal Capital Territory and their Agencies” at
To summarise, the Federal Ministry of Finance, Budget and National Planning works with the MDAs under whose portfolio a proposed loan falls and also with the DMO. Thereafter, the approval of the Federal Executive Council (FEC) is sought.
It is only after the approval by FEC that His Excellency requests for the approval of the National Assembly (NASS) as required by Section 41 of the Fiscal responsibility Act, 2007.
More importantly, it is only after the approval of NASS that the Loans are taken and Nigeria begins to drawdown on the Loans.
In summary, Borrowing is a joint activity between the Executive (FEC) and the Legislative (NASS) Arms of Government.
3. How Rigorous is the Loan Documentation?
The Loan Agreements are reviewed by legal officers of the Federal Ministry of Justice and the Legal Opinion of the Honourable Attorney General of the Federation and Minister of Justice is obtained before any External Loan Agreement is signed.
Can China Take Possession of the Projects Financed by them if Nigeria Defaults in the Servicing of the Loan?
Firstly, Nigeria explicitly provides for Debt Service on its External and Domestic Debt in its Annual Budgets. In effect, this means that Debt Service is recognised and payment is planned for.
In addition, a number of the projects being (and to be) financed by the
Loans are either revenue generating or have the potential to generate revenue.
Nigeria has earmarked N600 billion as loan to enhance farmers’ access to agricultural financing, Minister of Agriculture and Rural Development, Mr Sabo Nanono, has said.
Nanono said that about 2.4 million farmers were targeted to benefit from the interest free facility, designed to encourage application of modern technologies in rice and cash crop cultivation.
He unveiled the plan at the inauguration of the 2020 wet season rice cultivation support programme at Tofai community in Gabasawa Local Government Area of Kano State.
The programme is being implemented under the Agro Processing Productivity Enhancement and Livelihood Improvement Support Project (APPEALS).
Nanono said the initiative would support farmers to achieve improved productivity, enhance self -sufficiency and food security in the country.
He said: “We have commenced farmer registration exercise to capture their information, number of farmlands and locations.
“Also, the beneficiaries will be monitor to ensure effective utilisation of the facility, and mobilise participation in subsequent programmes.”
Nanono commended the APPEALS project for supporting rice farmers in the state, noting that the gesture would go a long way to encourage agricultural activities in the country.
The minister urged the beneficiaries to make good use of the of fertiliser, seeds and inputs given to them to boost their production capacity.
“If you make proper use of the inputs, you could employ other people and it will enable you to participate in subsequent programmes.”
Also speaking, the Coordinator, APPEALS Project in the state, Hassan Ibrahim, said the project was being executed in a joint collaboration between the World Bank, Federal Government and the six participating states.
Ibrahim listed the participating states to include Kano; Kaduna, Cross Rivers, Enugu, Lagos and Kogi.
He said that about 100 farmers drawn from six rice farmer groups participated in the programme in Gabasawa, Kano.
The coordinator noted that the gesture was to augment the Federal Government’s policy on agriculture, designed to encourage productivity, enhance farmer enterprising skills, food security and value addition as well as promote export.
“The APPEALS Project in Nigeria is to enhance agricultural productivity of small and medium holder farmers, to improve value chains in the six participating states.” he said.
He added that 480 tons of rice were expected to be produced by the selected farmers in Kano State.
On his part, Alhaji Zubairu Ibrahim, Chairman, All Farmers Association of Nigeria (AFAN) in the state, lauded the Federal Government’s agriculture transformation programmes.
Ibrahim said the association would adopt proactive measures to assist its members benefit from viable agriculture development programmes and farmer support services initiated by the government.