Abuja — President Umaru Musa Yar'Adua has sent a formal request to the Senate, seeking approval of $10 million soft loan to the Democratic Republic of Sao Tome and Principe.

Yar'Adua, in the letter dated May 5, 2009 and addressed to Senate President David Mark, said the amount would be sourced from his contingency vote.

He said Sao Tome and Principe was being considered for the loan against the backdrop of its previous record of prompt repayment of a similar loan of $15 million, which was granted between 2002 and 2004.

"The loan was fully repaid according to the terms of the loan in April 2007," Yar'Adua said in the two-page letter.

The letter, entitled: "Grant of US$10 million Soft Loan to the Democratic Republic of Sao Tome and Principe (DRSTP)," read in part: "The Senate President and the Distinguished Senators may kindly wish to note that the Government of the DRSTP through its Prime Minister, Dr. Patrice Emery Trovoada, made a request for a soft loan of US$30 million from the Federal Republic of Nigeria in March 2008.

"The loan is to assist the government address some socio-economic difficulties in the country.

"I directed the Management of the Debt Management Office to evaluate the request and it has advised that the soft loan could be considered based on the following reasons:

"Nigeria's assistance to Sao Tome and Principe, a strategic maritime neighbour, which is anchored in the framework of the Joint Development Zone (JDZ), will strengthen and consolidate the security in the Gulf region, taking into account the geopolitics of international oil crises and economic interest of Nigeria.

"By nature of the request, especially the emergency that the DRSTP faces and considering the relationship between Nigeria and DRSTP, the soft loan would be interest-free, while the loan would be repaid within four to six years.

"The DRSTP has a previous record of prompt payment as was evidenced in the case of a similar loan of US$15 million, granted between 2002 and 2004. The loan was fully repaid according to the terms of the loan in April 2007.

"Repayment will be from the Production Sharing Contract (PSC), in respect of the JDZ oil concessions, in which there are revenues from signature bonuses, sales of seismic data, royalties, taxes, etc."

Yar'Adua said a memo was presented to the Federal Executive Council (FEC) by the Minister of Finance in June 2008, stressing that the Council was favourably disposed to granting the loan.

He stated that the FEC, in endorsing the request, took into account Nigeria's strategic and economic interests as well as security consideration.

According to him, "Subsequently, following the outcome of meetings with the government officials from the two countries, and the official visit of the President of Sao Tome and Principe, we agreed that the loan amount would be reduced to $10 million in the first instance, with additional tranches at the appropriate time, based on a separate consideration."

He added: "The Senate President and Distinguished senators may wish to note that Section 25 of the DMO (Establishment, etc) Act, 2003 states, inter-alia, 'that application for grants or loans to a foreign State may be submitted by the President to the National Assembly and may be approved subject to such terms and conditions as may be prescribed by a resolution of the National Assembly.'"