The Debt Management Office (DMO) has unveiled new guidelines on external and domestic borrowing by federal and states as well as the Federal Capital Territory (FCT), Abuja.
Under the new arrangement, it is mandatory for the three levels of government to seek prior approval of their various executive councils and the legislative arms for the proposed facility.
In addition to the approvals, there should be evidence of submission of the proposal to the finance minister for incorporation into the Medium-Term External Borrowing Plan.
The debt management agency stated further that for the federal government, external borrowing must pass through the federal executive council, then through the National Assembly for final approval.
The proposal by the federal government must include the detail of projects to be funded by the loan and the revenue versus the deficit the borrowing is meant to be filled.
Furthermore, states and federal capital territory intending to borrow externally must pass their proposal through the state executive councils, and then the state’s house of assemblies before submitting such request to the Minister for inclusion in the Medium Term External Borrowing Plan.
The DMO stated that the proposal must include the details of the projects to be funded by the loans, the amount to be borrowed and the repayments schedule, which must be included in the state budget proposals.
“Purpose of the Loan and the repayment plans (including sources of repayment) for the Loan.
“The Approval of the
State Executive Council should be evidenced in writing and duly signed by the
Secretary to the State Government. In addition, the Resolution of the State
House of Assembly, duly signed by the Clerk should be provided.” the debt
management office said.
It added that states and FCT are to ensure that their Total Loans, including the proposed loan, do not exceed 250 percent of their Total Revenue for the preceding year.
The revised guide further reads: “The Borrowing Proposal must be submitted to the Minister for consideration. The Proposal should include the following:
i. The purpose for which the Borrowing is intended and its link to the developmental Agenda of the Government;
ii. Cost-Benefit Analysis showing the economic and social benefits of the intended borrowing;
iii. Cash-flow Projection of the Project to To receive Approval-in-Principle, the DMO shall conduct a Debt Sustainability.
“Analysis to ascertain that the Monthly Debt
Service deduction of the State or FCT, including the servicing of the proposed
new loan, does not exceed 40 percent of the Total Monthly Revenue (FAAC and
IGR) of the State or FCT for the preceding 12 months, and make recommendations
to the Minister as appropriate.
“The borrowing requests from the States and FCT incorporated into the
Medium-Term External Borrowing Plan for consideration and approval of FEC and
NASS”.