Tinubu Seeks N10.79tn External Borrowing Approval From Reps

• President Bola Tinubu requested House of Representatives approval to implement the N10.79 trillion external borrowing plan from the 2026 Appropriation Act.
• This plan aims to finance a portion of the federal government's budget deficit by raising approximately $7.71 billion at a N1,400 to $1 exchange rate.
• The request complies with the Debt Management Bureau Act of 2011, which replaced the Debt Management Office Establishment Act of 2003, requiring National Assembly approval for external loan terms and conditions.
• The N10.79 trillion external debt is part of a larger N29.22 trillion new borrowing approved for the 2026 budget, which also includes N18.28 trillion in domestic loans.
• The government prioritizes Eurobond issuance for its speed and relatively lower costs, with proceeds intended for critical sectors, strengthening external reserves, and supporting the naira.

The administration intends to pursue various borrowing avenues concurrently, carefully weighing the cost of borrowing against the time required to access the necessary funds.

President Bola Tinubu has formally approached the House of Representatives, seeking legislative endorsement to proceed with the N10.79 trillion external borrowing component outlined within the 2026 Appropriation Act. This significant financial move is intended to partially cover the federal government's budget deficit. The President's communication, addressed to Speaker Tajudeen Abbas, was presented during a recent Wednesday plenary session, detailing a request to secure approximately $7.71 billion. This dollar amount is calculated using the budget's stipulated exchange rate of N1,400 to one US dollar.

The President's letter underscored that this request is not for a new borrowing initiative but rather for the implementation of an already approved plan. Speaker Abbas later reiterated this point, clarifying that the N10.79 trillion external debt had previously received National Assembly approval and was incorporated into the 2026 Appropriation Act. The current appeal, therefore, focuses on obtaining the necessary authorization to execute the terms and conditions of these external loans, aligning with statutory requirements.

The basis for President Tinubu's request stems from the Debt Management Bureau Act of 2011, which repealed the Debt Management Office Establishment Act of 2003. This legislation, specifically Sections 21(1) and 27(1) (from the original Act, likely carried over or similar provisions in the new Act), legally mandates that the terms and conditions associated with any external loans must be formally presented to and approved by the National Assembly. This legislative oversight ensures transparency and accountability in the nation's borrowing activities. The proposed external borrowing forms a crucial part of the broader N29.22 trillion new borrowing approved to address the federal government's budget deficit for 2026.

Within this comprehensive borrowing plan, N18.28 trillion is allocated for domestic loans, while the remaining N10.79 trillion is designated for external financing. The precise figure for the external component is N10,790,366,835,481, which translates to $7,707,404,882.49 at the agreed budget exchange rate of $1 to N1,400. This structure highlights a balanced approach to financing the deficit, leveraging both internal and international capital markets.

The administration intends to pursue various borrowing avenues concurrently, carefully weighing the cost of borrowing against the time required to access the necessary funds. A particular emphasis will be placed on Eurobond issuance, which President Tinubu identified as a more expeditious method for raising substantial capital at comparatively lower costs. The final terms and conditions of any Eurobond issuance will, however, be contingent upon prevailing market conditions at the time of pricing, reflecting a pragmatic approach to securing favorable rates.

The Federal Ministry of Finance, in collaboration with the Debt Management Office, is tasked with diligently working to secure the most advantageous borrowing terms available in the international market. The proceeds from these external loans are earmarked to finance critical projects and programs detailed in the 2026 budget across key sectors, including defense and security, transportation, agriculture, power, education, and health. Furthermore, these funds are expected to bolster Nigeria's external reserves and provide crucial support for the national currency, with the Central Bank of Nigeria designated to receive the funds on behalf of the federal government. The President also sought authorization for the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, alongside the DMO, to take all necessary steps to implement this borrowing arrangement, which includes raising funds through multilateral and bilateral institutions, conventional and commercial lending windows, the International Monetary Fund, bridge financing facilities, and Eurobond issuance.

Lawyers advising clients on Nigerian public finance, sovereign debt, or infrastructure projects should closely monitor the implementation of this N10.79tn external borrowing plan. Understanding the legal framework for these borrowings, including the specific instruments like Eurobonds, is crucial for assessing investment risks, advising on public-private partnerships, and ensuring compliance with relevant financial regulations as the government seeks to finance its budget deficit.

Source: Original reporting via PUNCH Nigeria