The Federal government is expected to borrow N4.89 trillion from multilateral institutions such as the African Development Bank Group, the World Bank, the International Fund for Agricultural Development, the Arab Bank for Economic Development in Africa, Eurobond, and the Islamic Development Bank to finance the budget deficit for 2022.
This is according to the Debt Management Office’s report on Nigeria’s Debt Management Strategy for 2020-2023.
According to the report, the Federal Government planned to borrow money for the 2022 budget from domestic sources, using securities such as Nigerian Treasury Bonds, Saving Bonds, Federal Government Bonds, Infrastructure Bonds, and Treasury Bonds.
Due to declining government income, Zainab Ahmed, Minister of Pay, Budget, and National Planning, announced on Monday that the Federal Government would borrow N4.89 trillion from local and foreign sources to finance its budget deficit for 2022.
According to the report, the federal government intends to borrow fixed and variable loans from international institutions to fund the fiscal year 2022 budget.
Multilateral fixed-rate loans are typically low-cost, with a fixed rate of 0.79 percent each year, a 35-year maturity, and a seven-year grace period.
The AfDB, IFAD, International Development Association, and European Development Fund will all provide multilateral fixed loans, according to the report.
The AfDB loan has a 30-year term with a seven-year grace period and a 0.96 percent annual interest rate, while the loan terms for the other multilateral organizations cited were 35 years with a seven-year grace period and a 0.80 percent annual interest rate.
In 2022, organizations such as the IDB, the International Bank for Reconstruction and Development, the African Development Bank, and the African Growing Together Fund are expected to offer fixed and variable loans to Nigeria, according to the research.
The fixed loans offered by these organizations have a fixed rate of 16.3%, a 25-year maturity, and a five-year grace period, while the variable loans have an annual interest rate of 3.34 percent, a 25-year maturity, and a five-year grace period, respectively.
Meanwhile, the Federal Government intends to purchase Eurobonds with maturities of 10 and 20 years and interest rates of 8.20% and 9.50%, respectively.
The bonds will have nine and 29-year grace periods, respectively.
The fixed and variable bilateral debts would be bought by the Federal Government in 2022, according to the article.
Fixed bilateral loans will be purchased at a 2.4 percent annual interest rate with a 20-year maturity and a five-year grace period, while variable bilateral loans will be purchased at a 1.61 percent annual interest rate with a 20-year maturity and a five-year grace period.
NTBs with a 5% interest rate and a one-year maturity, saving bonds with an 8% fixed interest rate, three-year maturity, and two-year grace period, and T-Bonds with a fixed interest rate of 12.50%, five-year maturity, and a four-year grace period would all be acquired as domestic loans during the period, according to the report.
Other domestic loans include FGN Bonds, which have maturities ranging from five to thirty years, and Infrastructure Bonds (Sukuk, Green), which have a seven-year maturity and a six-year grace period and are priced at a fixed rate of 12.85 percent.