Abuja — Barely 24 hours after presenting the 2009 Appropriation Bill, President Umaru Musa Yar'Adua has written to the National Assembly, asking it to consider and approve the issuance of naira-denominated Bond in the international capital market in the equivalent of $500 million.

The bond, THISDAY learnt, is meant to raise funds to take care of the anticipated over N1 trillion deficit in the 2009 budget.

But the Senate Committee on Appropriation, under the chairmanship of Senator Iyiola Omisore, has kicked against the country taking foreign loans.

In the four-page letter addressed to Senate President David Mark and Speaker of the House of Representatives Dimeji Bankole, Yar'Adua said the Federal Legislature "may kindly wish to note that in line with my government's objectives, inter alia, of improving the well-being of our people, guaranteeing their security, providing infrastructure as engine of economic growth and creating an enabling environment for private sector participation on the economy, the Federal Government proposes to issue Nigeria's sovereign bond in the International Capital Market (ICM), to establish a sovereign benchmark.

"The benchmark issue of the naira denominated Bond (in the equivalent of US$500 million) will be for a tenor of 10 years."

In the letter dated November 27, 2008, which was read on the floor of the Senate yesterday by Mark, the President said: "In this respect, and in line with the recommendation of the Federal Executive Council, I wish to seek the approval of the Senate for the issue.

"The Distinguished Senate may wish to note the advantages of accessing the ICM include:

• An ICM outing would be a means of raising substantial capital needed to finance infrastructure and create, in line with the Seven-Point Agenda and NEEDS II, the right environment for private sector led growth;

• A sovereign bond issuance will serve as a benchmark for subsequent issues by the Federal Government, Sub-national Governments and, more importantly, the private sector;

• It will complement significantly, efforts being made to project Nigeria internationally as one of the strong emerging economies in the world;

• The bond will create more awareness about Nigeria in the international investor community particularly fund managers. This will provide a strong investor base for capital issues coming out of Nigeria whether it be from the public or private sector;

• The experience gained from a global issue, will serve to improve skill sets in local parties that will be involved in the packaging of the issue, and give closer insight to how the international capital markets operate. Such skills and knowledge would be brought to bear on future issues and possibly, serve to raise the standards in our local capital markets; and

• The International Fund Managers and self-managed financiers (individuals and corporate) who wish to either take equity or provide credit facilities to parties interested in the PPPs, will need the benchmark to facilitate their decision and participation.

But in a letter dated December 2, 2008 by Senator Omisore to the Minister of Finance, entitled: "An Appraisal of Feedback Re: US$500M Naira Denominated Loan," he said: "Nigerians are becoming concerned that the country is inadvertently going back to the era of unbridled consummation of external loans, a practice for which the nation and her citizenry had suffered severely in the past."

He also said evidence had shown that Nigeria did not productively utilize such loans it procured over the three decades, principally due to lack of institutional capacity.

According to him, "In addition, research has shown that no developing country can ever attain the feat achieved by the current developed nations by relying perpetually on external loans, but through trade promotion and substantial foreign exchange earnings.

"Perhaps of utmost importance is the fact that consummation of external loans is tantamount to signing a treaty with a foreign nation or institution.

"In a truly representative political system, such treaty must not be entered into until it has been approved by the national parliament, typified by National Assembly (NASS) in our own case."