By Oluwole Josiah.VANGUARD. December 7, 2012
President of the Senate, David Mark | credits:
Representatives of the federal and state governments appeared before the Senate Committee on Local and Foreign Debts on Thursday to defend their proposals for $7.9bn external borrowing under the medium term expenditure framework for 2012 to 2014.
The breakdown of the borrowing plan showed states’ total borrowing proposal of $3.059bn, while the Federal Government has $4.846bn.
Minister of State for Finance, Dr. Yerima Ngama, who led the team of commissioners for finance of states before the committee, explained that the loans were tied to specific projects to ensure that they filled a developmental gap in the economy and for timely repayments.
He argued that Nigeria’s external loan status was still within 17 per cent of the GDP, and that there was no need to worry over adverse effects of the loan burdens.
According to Ngama, the loans exited by the country were loans collected from the open market and had very short periods of maturity.
He said, “These loans we are taking now are concessionary loans from development agencies, they are not private sector lenders. These are also agencies where we are stakeholders, besides the China Exim Bank and they have maturity periods of up to 40 years.”
Ngama noted that the Ministry of Finance had done a collective negotiations for the loans to ensure a uniform rate and to make sure that the states got the best offers.
“We don’t want states and parastatals to start discussing with the banks separately because that will result to having different lending rates.
“The Coordinating Minister for the Economy has discussed a common line of credit for the beneficiaries so that they can get the best terms for the loans,” he added.
Chairman of the committee, Senator Ehigie Uzamere, said the committee needed to know what the respective states were borrowing and for which projects.
He noted that although there were concerns that the states might not be able to pay back the loans given the benefit of history, the Senate could only ensure that they met the terms of external borrowing.
According to Uzamere, the Senate would only be concerned about oversight on what the Federal Government is borrowing, as state assemblies had the similar responsibility.
Although each state was expected to present a separate document, showing the projects for which they are borrowing, the figures were aggregated during the presentation of the Minister of Finance.
President Goodluck Jonathan has sent in the request for the approval of loans by the National Assembly since February, but senators have been wary of further loan encumbrances.
The borrowing plan, which is tagged as Pipeline projects, will see the Federal and State Governments borrowing $2.975bn from the World Bank; $731.23m from African Development Bank, $672.85m from Islamic Development Bank; $56.61m from the French Development Agency and $3billion from the Exim Bank of China.
The committee will have to put together a report before the full Senate before an approval can be secured for the loans.