UPDATED: Senate approves Buhari’s request to borrow $22.8bn as debt service costs surges

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ABUJA, March 5 – Nigeria’s upper house of parliament has approved foreign borrowings of $22.7 billion requested by President Muhammadu Buhari, the Senate President said on Thursday.

About $17.06 billion of the total loans will be provided by China’s Eximbank, while the World Bank, African Development Bank, Islamic Development Bank and German Development Bank are in the mix of the new borrowings tied to projects.

Nigeria has been borrowing abroad to fund projects after a 2016 recession caused largely by low global oil prices hurt its spending plans, but debt service costs have been rising.

The country also plans to sell a $3.3 billion eurobond this year to refinance an existing maturity and part-fund its 2020 budget of 10.59 trillion naira ($35 billion), which is a 17% rise over last year’s.

“Let me emphasize here that we are going to follow very strictly how this loans are applied,” Senate President Ahmed Lawan said. “The loans will have positive influence on the GDP of this country.”

Africa’s largest economy has struggled to shake off the effects of the contraction that ended in 2017 and has been grappling with low growth since. It grew 2.27% in 2019 from 1.91% the previous year, supported by a favourable oil price.

Buhari asked parliament in November to approve the borrowings, which are tied to infrastructure and other projects, after a similar request was rejected three years ago.

During Buhari’s first term, the executive was embroiled in a power tussle with the legislature that slowed government, including confirmation of appointments. Buhari won a second term in February and some of his party loyalists in parliament were re-elected.

Finance Minister Zainab Ahmed said on Wednesday the government was concerned about the impact of the coronavirus outbreak on world oil prices, which are now trading below Nigeria’s budget assumption. This could trigger a midterm budget review, she said.

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