President Buhari Asks Senate To Approve N22 Billion Refunds; Experts Predict Increased Bond Rates

President Muhammadu Buhari has reportedly requested the Senate to approve reimbursement for the construction of the Dabua-Chibok federal road in two states--Borno and Plateau.

In a letter he sent to Senate President Ahmad Lawan on Tuesday, Buhari asked N16 billion for Borno and N6 billion for Plateau.

"For the reimbursement of the sum of sixteen billion, seven hundred and seventy-two million, four hundred and eighty-six thousand, two nairas and two kobos to Borno State Government through the issuance of provisory laws in respect of federal roads projects executed by the state," the letter mentioned, Premium Times reported.

The letter further shared that "the Federal Executive Council, FEC at its meeting conveyed in March 2023 approved the reimbursement of the sum of sixteen billion, seven hundred and seventy-two million, four hundred and ninety-six thousand, two nairas and two kobos to the Borno State Government through the issuance of provisory laws in respect of federal road projects executed by the state in respect of the conclusion of the meeting of FEC referenced EC/14/2023/6 as the committee's report FEC is tagged as appendix one."

The president also mentioned in the letter the FEC had previously approved the "reimbursement of the sum of three billion, eighty-four million, seven hundred and sixty-nine thousand, three hundred and ninety-three naira, zero kobos as it is written on February request 2023."

Moreover, President Buhari also recalled there was an approval of "six billion, six hundred and one million, seven hundred and sixty-nine thousand, four hundred and seventy naira and ninety-nine kobo for the reimbursement to Plateau State Government."

Considering the demand, experts shared this approval can cause a rise in bond rates as well as lead to more borrowings.

The Chief Executive Officer of Arthur Stevens Assets Management, Tunde Amolegbe, explained the "rate on the bond may be issued at a higher interest rate, and since the government interest rate serves as a base rate, subsequent bond rates by corporations may also increase due to the public's perception that the government is unable to service its debts," Economic Confidential reported.

Investment professional Ayodeji Ebo also said this approval can lead to more borrowings for the country.

The Debt Management Office (DMO) revealed in March that the total public debt of Nigeria-- including domestic and external debt stocks of the federal government and subnational governments--reached N46.25 trillion in the fourth quarter (Q4) of 2022.

Nigeria is already going through a major economic crisis since demonetization and constant borrowing.

The director-general of DMO, Patience Oniha, pointed out last month the constant borrowing and promissory notes alongside the budget deficit is the reason for the increase in public debt, adding the "total public debt to GDP is about the lowest in Africa."

President Buhari will step down from his position later this month, and the former governor of Lagos State, Bola Ahmed Tinubu, will take over the position, following his inauguration on May 29.