Nigeria’s Senate dealt President Muhammadu Buhari an unexpected blow on Tuesday by rejecting his plan to borrow $30 billion abroad for infrastructure projects and budget support until 2018.
The decision makes it more difficult for Buhari to build new roads and invest in outdated power grids with a view to boosting agriculture and other non-oil industries, and reducing the economy’s dependence on dwindling crude revenues.
Senators threw out the plan, introduced last week, without a debate.
“I was shocked. I think it was defeated on technical grounds,” Ali Ndume, Senate majority leader from Buhari’s All Progressives Congress (APC), told reporters. “I will try and reintroduce it [the bill] again. We will do what is right.”
Just minutes after the vote, the finance ministry sent a statement again justifying the borrowing plan. A ministry official declined to comment on the rejection.
“The loans, which cover a period of three years, would help in addressing the biting infrastructure deficit in the country,” the ministry quoted a top debt official as saying in its statement.
First recession in 20 years
Buhari’s borrowing plans had included the sale of eurobonds worth $4.5 billion and planned budget support of $3.5 billion.
The Senate setback undermines the president’s authority as he tries to lift the OPEC country out of its first recession in more than 20 years, triggered by low global oil prices. Crude oil sales account for about two-thirds of government revenue.
Some lawmakers, including from the APC, have objected to government plans to sell oil and other assets to raise badly needed hard currency.
“Why this appears strange is because … they [lawmakers] tend to approve whatever the president puts on their table,” said Ayodele Thompson, director at the Initiative for Public Policy Analysis think tank.
Attempts to borrow funds fail
“If you look at how we got into the debt in the past, you would realize that borrowing is not the answer to economic recession,” he said. “The government needs to take some hard decisions like shrinking its size.”
Buhari had already sent a draft budget for 2017 to parliament for approval, detailing plans to spend a record 6.866 trillion naira ($22.55 billion).
The planned spending is up from this year’s 6.06 trillion naira and seeks to stimulate growth by funding infrastructure development.
The government has held months of talks with the World Bank, China and other institutions to fund a 2016 budget deficit of 2.2 trillion naira, but so far only the African Development Bank has publicly confirmed a planned loan of $1 billion.
Sale of Eurobonds next?
Nigeria aims to sell $1 billion in eurobonds by the end of the year though no bank has been publicly appointed to arrange the deal.
The government has sought to attract investment, but hard currency curbs to keep the naira rate to the dollar artificially high have deterred firms as they expect another devaluation at some point.
In June, the central bank said it would float the naira but it has reinstated an informal peg, which has knocked the currency down some 40 percent on the parallel market.
Source: Voice of America.