The December 2022 development update of the World Bank has projected that interest payments on the Nigerian government’s borrowing from the Central Bank (CBN), will gulp about 62 percent of revenue by 2027, despite the restructuring plan.
Through the Ways and Means Advances, the total borrowing by the Nigerian government from the CBN in 10 months, is put at N6.31 trillion.
According to the report, “Despite the restructuring of the Ways and Means stock in 2023, interest payments are projected to steadily increase by 2.4 percentage points of GDP between 2018 and 2027, and by 2027 interest payments will account for over 62 percent of revenues.”
This pushed the Federal Government’s borrowing from the CBN from N17.46tn in December 2021 to N23.77tn in October 2022.
The N23.77tn owed the apex bank by the Federal Government is not part of the country’s total public debt stock, which stood at N44.06tn in the third quarter of 2022, according to the Debt Management Office.
The public debt stock only includes the debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory.
Ways and Means Advances is a loan facility through which the CBN finances the shortfalls in the government’s budget.
The World Bank had, in November last year, warned the Nigerian government against financing deficits by borrowing from the CBN through the Ways and Means Advances, saying this put fiscal pressures on the country’s expenditures.
Despite warnings from experts and organisations, the Federal Government has kept borrowing from the CBN to fund budget deficits.
Economic Confidential had reported that the Federal Government paid an interest of N2.03tn from January 2020 to November 2021 on the loans it got from the CBN through the Ways and Means Advances.
It was also reported that the Federal Government paid an interest of N405.93bn from January 2022 to April 2022 on the loans it got from the CBN.
The Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, recently said the central bank’s lending to the government was putting pressure on the exchange rate and the inflation rate, with “liquidity that has no productivity attached to it coming into the system.”
Meanwhile, last week, President Muhammadu Buhari transmitted to the National Assembly, a request for approval of Ways and Means Advances restructuring to the tune of N23.7tn.
At the plenary on Wednesday, President of the Senate, Ahmad Lawan; and Speaker of the House of Representatives, Femi Gbajabiamila, read out Buhari’s request to members of the respective chambers.
In the request titled ‘Restructuring of Ways and Means Advances,’ the President wrote, “The Ways and Means Advances by the Central Bank of Nigeria to the Federal Government has been a funding option to the Federal Government to cater for short-term or emergency finance to fund delayed government expected cash receipt of fiscal deficit.
“The Ways and Means balances as of 19th December, 2022, is N23,719,703,774,306.90. I have approved the securitisation of the Ways and Means balances along the following terms: amount, N23.7 trillion; tenure, 40 years; moratorium on principal repayment, three years; pricing interest rate, nine percent. Your concurrence and approval is sought to allow for the implementation of the same.”
However, the Senate rejected the request by the president to restructure the N23.7 trillion Ways and Means advances.
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