Nigeria’s total public debt may balloon to over N62.84 trillion if the Debt Management Office (DMO) proceeds to add the total N20 trillion “Ways & Means’’ advances to the Federal Government by the Central Bank of Nigeria (CBN).
On Wednesday, the Federal Government, through the Minister of Finance, Budget and National Planning, Zainab Ahmed, confirmed for the first time that the advances to it from the apex bank in the form of “Ways & Means” rose to about N20 trillion.
Ways & Means advances from the CBN as a loan facility to help the government finance the shortfalls in its annual budgets.
In its maiden report, Agora Policy, an Abuja-based policy think tank, which analysed Nigeria’s economic datasets from 2011 to 2021, said advances by CBN through Ways & Means granted to the Federal Government grew by over 7,000 percent over the period under review.
Most of these advances, the report said, were not captured in the official figures for domestic debt, in contravention of the CBN Act.
But, the Director-General of the DMO, Patience Oniha, is quoted to have said the proposed addition of Ways & Means to the country’s total public debt could only be carried out after necessary approvals by the relevant authorities.
Oniha was speaking in a response to enquiries following the confirmation by the Finance Minister on Wednesday that the total advances by the CBN to the government through “Ways & Means’’ would be securitised.
The DG said broad terms concerning the issue have already been agreed with the CBN, while the approvals by the Executive Council of the Federation (FEC) and the National Assembly were being processed.
“After these approvals, the amount will be included in the published public debt data,’’ she said.
At the briefing on Wednesday in Abuja to provide details of the 2023 Appropriation Bill, Ahmed announced the government would repay the N20 trillion indebtedness to the CBN through the issuance of securities as treasury bills and bonds.
She said President Muhammadu Buhari had already given approval for the securitisation of the N20 trillion debt over the next 40 years at an interest rate of nine percent per annum.
Oniha said over the years, the government has been paying the interest component of the loan at the current rate charged on the Ways & Means facility.
Some stakeholders complained that the Federal Government’s borrowing from the CBN had exceeded five percent threshold of the prior year’s revenue, as stipulated in Section 38 of the CBN Act, 2007.
The Act states: “Notwithstanding the provisions of Section 34d (1) of this Act, the Bank may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate of interest as the Bank may determine.
But Section 38d (2) states: “The total amount of such advances outstanding shall not at any time exceed five percent of the previous year’s actual revenue of the Federal Government.
The Act demands that alI advances should be repaid as soon as possible and shall in any event be repayable by the end of the Federal Government financial year they were granted.
In the event that such advances remain unpaid at the end of the year, the power of the Bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.
Such payment, the Act stipulated, should take the form as the CBN may determine, provided no repayment shall be a promissory note, or such other promise to pay at a future date, or securitization by way of issuance of treasury bills, bonds, certificates or other forms of security required to be underwritten by the CBN.