WED, APRIL 29 2020-theG&BJournal- For now the details of the N850 billion loan request is still sketchy, and that is also why the Senate directed its Committees on Finance and Appropriation to liaise with Minister of Finance, Budget, and National Planning, Zainab Ahmed, to get more details.
In the President’s letter to the Senate requesting the loan, he alluded it will be for financing projects in the budget, and more importantly, he is seeking to raise the money from the domestic market.
Here is theG&BJournal’s take: The source of fund ought to match the nature of the borrowing requirement particularly with respect to nature.
To meet recurrent expenditures, Treasury Bills are typically the appropriate match while Bonds are more appropriate for capital spending with longer implementation time and gestation.
The bond market would probably provide a likely solution in that the interest rate will be more attractive having factored in tenor risks unlike TBs that they can only compel banks to subscribe to through regulatory pressure.
Still, it is doubtful if the Federal Government can come up with bond rates that will fit investor appetite given the instability in the foreign exchange regime that has made Naira-denominated financial assets unattractive.
Unfortunately, in this case, we do not know what the president is borrowing for. Is it to provide relief against Economic disruptions occasioned by the COVID-19 pandemic or is it to bridge the deficit arising from the crash of oil price and consequential loss in fiscal revenues?
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