LAGOS (Reuters) - Nigeria’s President Muhammadu Buhari has sought approval from lawmakers in the upper chamber of parliament for $5.5 billion (4.17 billion pounds) of foreign borrowing, according to a letter read in the Senate on Tuesday.
Africa’s biggest economy grew in the second quarter, climbing out of its first recession in 25 years as oil revenues rose, but the pace of growth was slow, suggesting the recovery remains fragile.
Nigeria expects a shortfall of $7.5 billion in its record 7.44 trillion naira ($24.33 billion) 2017 budget, which it plans to offset with foreign loans.
The $5.5 billion of external borrowing would include $2.5 billion for plugging part of the 2017 budget deficit, and $3 billion for refinancing maturing domestic debt with dollar borrowing, to lower costs and improve the country’s debt position, the president’s letter said.
“Current market conditions are considered more favourable than at the time of Nigeria’s last issuances of the Eurobond in March 2017,” said the letter.
The government aims to raise $2.5 billion through Eurobonds, if possible, the letter said, adding that Diaspora Bonds will be issued to offset any shortfall. A further $700 million of borrowing from “multilateral sources” is being proposed, it said without specifying those sources.
The government intends to spend money on infrastructure projects such as the $5.8 billion Mambilla hydropower dam, a second runway for the capital Abuja’s airport and railway and road construction.
Such projects are aimed at helping diversify Nigeria’s oil-dependent economy. Crude oil sales make up about two-thirds of government revenue.
As for the planned debt refinancing through $3 billion of new dollar loans, the president’s letter said it “will not lead to an increase in the public debt portfolio because the debt already exists, albeit in the form of high interest short term domestic debt.”
“Urgent steps” are needed to reduce debt service costs, which account for a third of the 2017 budget, the letter said.
The government is looking at reducing local borrowing to lower interest rates, said Nigeria’s Vice President Yemi Osinbajo, at an economic conference in Abuja.
“We are concerned about interest rates. Most of that has to do with government borrowing and we intend to look at that closely,” he said.
The budget minister last week said the government needed to speed up budget implementation and 1.07 trillion naira worth of foreign borrowing had not been approved by parliament.
Additional reporting by Paul Carsten and Chijioke Ohuocha in Abuja; Editing by John Stonestreet