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2017 Budget in trouble as Buhari seeks $5.5bn loans

.Wants Senate to approve external loans request

.Says loans to finance budget deficit, capital projects

.Reps probes Duke Oil over non-remittance of N6tr revenue

Olufemi Samuel and Henry Omunu, Abuja

The 2017 Budget may be facing serious challenge as the Federal Government is desperately seeking ways and means to finance it.

The federal government had budgeted N7.42trillion for the 2017 fiscal year in order to meet its statutory expenditure and revenue obligations to Nigerians. But it appears the federal government is not finding it easy to finance the budget due to shortfall in revenue earnings.

The development might have prompted President Muhamadu Buhari to seek the approval of the Senate for $5.5billion (about N1.98trillion) external loans in order to finance the deficit in the 2017 Appropriation Act and some capital expenditure projects.

Buhari, who sought the approval of the loans request from the Senate on Tuesday, said that part of the loans would be used specifically to re-finance the maturing domestic debt obligations expected to come from issuance of Eurobond, through loan syndication.

The Senate President, Dr Bukola Saraki, on resumption of plenary on Tuesday, read the President’s request for the loan. The breakdown of the loan showed that the sum of $2.5bn would come from the International Capital Market through Eurobonds.

Saraki added that the other aspect of the loan, totaling $3bn, as requested, is a direct external borrowing to be used for re-financing maturing domestic debt obligations.

According to Buhari in his letter, the loan requests had been captured in the 2017 Appropriation Act, which has a deficit of N2.356trn with provision of new borrowings of N2.321trn.
He said the 2017 Appropriation Act had also provided for domestic borrowing of N1.254trn; and external borrowing of N1.067trn amounting to $3.5bn.

Buhari further stated that to implement the External Borrowing as approved by the lawmaking arm of government in 2017, the Federal Government had issued a $300m Diaspora Bond in the international market in June this year.

He said the balance of the 2017 external borrowing in the sum of $3.5bn was planned to be partially sourced from
issuance in the International Capital Market to the tune of $2.5bn through Eurobonds.

According to him, the sum of $700m is proposed to be raised from multilateral sources.
Buhari said the plan by his government was to issue the Eurobond first with the objective of raising all the funds through Eurobonds, while Diaspora Bonds would only be issued where the full amount cannot be raised through Eurobonds.

He said: “The Senate may wish to note that the proceeds from the proposed issuance of Eurobonds (and Diaspora Bond) in the International Capital Market would be used to finance the deficit in the 2017 Appropriation Act; and provide funding for Capital Projects in the Budget”.

Buhari, however, listed the Capital Projects to include Mambila Hydropower, Construction of Second Runway at the Nnamdi Azikiwe International Airport, Counterpart funding for Rail Projects and construction of Bodo-Bonny Road with a bridge across Opobo Central.

The President also told the lawmakers that being market- based transactions, the terms and conditions of the borrowings can only be determined at the point of issuance of finalisation based on the prevailing market conditions in the International Capital Market.

Meanwhile, as the Federal Government is trying to avoid past pitfalls of poor budget implementation and paucity of funds, the House of Representatives may be helping the government to recover lost funds with a view to augmenting its budget.

Towards this end, therefore, the House of Representatives ad-hoc Committee mandated to investigate revenue leakages in the Department of Petroleum Resources (DPR) and other subsidiaries of the Nigerian National Petroleum Corporation (NNPC) also on Tuesday, commenced the probe of Duke Oil over alleged non-remittance of over N6trillion into the Federation Account.

Chairman of the Committee, Hon Jarigbe Agom Jarigbe, said that the committee will also look at the composition of the board of Duke Oil to ascertain who the directors are, why it was registered in Panama, while its head office is in the United Kingdom, but is doing business in Nigeria.

Other issues the committee will look into include the non-payment of taxes to the Federal Government by Duke Oil ; and why it has not published its audited accounts since inception.

Jarigbe further disclosed that a meeting between the House and the DPR revealed that the agency is facing difficulties in ensuring that revenues accruable to the Federal Government are remitted into government’s coffers.

He said: “The Speaker (House of Representatives, Hon Yakubu Dogara) asked pertinent questions regarding the payment of funds into the Consolidated Revenue Account, and while they assured that some of the funds had been remitted, a large portion of it is still out there.

“Mr. Speaker also demanded the status of outstanding remittances as alleged by petitions that led to the impending investigation, and they said documents to that effect would be made available at the shortest possible time.

“We know royalties are supposed to be paid to DPR, but from the information we have, some of these companies are not paying the required royalties and in this period of recession, we cannot allow some few cabals fleece away resources that are supposed to accrue to the Consolidated Revenue Account of the federation.”

The lawmaker, however, assured that the committee would be untiring in its effort aimed at further scrutinising the stock profile of the Port Harcourt and Warri Refineries with regards to the volume of refined products they produce per day.

“While other companies take 32,000 barrels of crude per day, Duke Oil alone takes 90,000 barrels per day; and uses other oil firms as third-party traders who pay into offshore accounts belonging to Duke Oil, whereas, there is no evidence of them remitting the said funds back to government coffers.”

“It is this leakage and the whereabouts of these missing funds that we want to unravel”, Jarigbe said.
Committee member, Hon Olayiwola Kazeem, regretted that revenue leakages have continued to plague the oil sector, adding that, “even now, the issue of Oil Mining Lease (OML) has arisen where these wells are not relinquished as at when due into the pocket for further re-allocation.”

The Daily Times recalls that the House mandated the Committee to, amongst other things, ascertain the actual quantity of crude lifted by Duke Oil, including determining the actual quantity of other petroleum by-products and gas supplies that royalties ought to have been paid by Duke Oil.

The latest move by the House may be impactful on the government’s efforts to block leakages in the system, reduce corruption, while ensuring available of funds to meet critical public needs.

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