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Osinbajo writes Senate to approve $500m to fund 2016 budget deficit

The Vice President, Prof. Yemi Osinbajo, on Wednesday, urged the Senate to approve 500 million dollars Euro Bond to fund the 2016 Budget deficit.

Vice President, Prof. Yemi Osinbajo, has urged the Senate to approve 500 million dollars Euro Bond to fund the 2016 Budget deficit.

In a letter to the upper chamber read by President of the Senate, Dr Bukola Saraki, at plenary, Osinbajo explained that the request was based on the 2016 appropriation, which provided for new borrowings.

He requested the resolution of the National Assembly for the issuance of the 500 million dollars Euro Bond in the international capital market for the funding of the 2016 budget deficit.

“The senate may wish to refer to item 229 and 244 of the 2016 Federal Government of Nigeria Appropriation Act which provided for a deficit of N2, 204.74 billion and new borrowings of N1, 818.68 billion, respectively.

“The Act also provided for domestic borrowing of N1, 182.80 billion and external borrowing N635.88 billion in line with item 245 and 246, respectively.

“The Senate may also wish to note that while the approved domestic borrowing has been fully incurred, the N635.88 billion on external borrowing has not been fully accessed.

“The external borrowing incurred today consist of 600 million dollars from the African Development Bank and one billion dollars Euro Bond for the International Capital Market (ICM) only.

“It was based on the 2016 appropriation and applying the average exchange rate, there is headroom to access further international funds.

“Following the high oversubscription of one billion Euro loan, we wish to take advantage of the favourable market conditions to issue a euro bond debt management of 500 million dollars to fund implementation of the 2016 budget.

“The Senate may wish to note that in line with the requirement of security issuances in the ICM, a specific resolution of the National Assembly as a firm confirmation of the approval of the legislature is required.

“This is for the Federal Republic of Nigeria to borrow the 500 million dollar through the issuance of the Euro Bond debt instrument in the ICM.

“The senate may wish to note that the proceeds of the Euro Bond are to be used as funding sources to finance the budget deficit, including capital expenditure projects as specified in the 2016 Appropriation Act,’’ he stated.

The vice president added that “with respect to the terms and conditions of the Euro Bond, the letter indicated that the terms and conditions of the Euro Bond may only be determined at the point of issuance.

“It is important to note that previous issuance of the 500 million dollars and 1 billion dollars consisting of two tranches of 500 million dollars and 1 billion dollars in January, 2011; July, 2013 and February, 2017.

“We issued coupons of 6.75 per cent, 5.13 per cent, 6.38 per cent and 7.88 per cent based on prevailing market conditions.

“The Debt Management Office (DMO) and the Federal Government appointed Transaction Parties to the issue are committed to working assiduously to secure the best terms and conditions.’’

He further stated that given that the implementation of the 2016 Budget was still ongoing, the Federal Government planned to issue the Eurobond between February and March, subject to market conditions.

Osinbajo, therefore, urged the senate to respond timely to the request to facilitate prompt completion of the bond.