President Muhammadu Buhari Tuesday asked lawmakers to approve the issuance of a fresh $2.79 billion Eurobond but questions linger about the justification in borrowing to finance consumption.
The president’s request is contained in a letter read in the senate Tuesday.
He said he wanted the Eurobond to be issued in the international capital market for the “implementation of new external borrowing” that had already been approved in the 2018 budget to help finance the budget deficit and to fund infrastructure projects.
Nigeria’s foreign debt has ballooned in the last two years and although part of the borrowing was used to cut the country’s domestic debt, analysts have been questioning the wisdom in borrowing at a time public assets are wasting away.
The government promised in the 2018 budget that part of the funding will come from sale of public assets but there is nothing as yet to prove that this target will be met.
Critics have advanced three key reasons why Nigeria’s current debt trajectory is unsustainable.
First, the borrowing is in foreign currency at a time the local currency is projected to fall in value. Secondly, the debt is not tied to investment but mostly used to fund consumption raising worries over how it will be repaid.
Finally, Nigeria should not be borrowing according to the analysts when it should be monetising idle or wasting public assets.
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