DEBT OVERHANG: FG to convert $45.4 bn CBN loan to 40-year bonds
Sopuruchi Onwuka
Federal government has introduced new debt management measures that would convert about N20 trillion or $45.4 billion of loans taken from the central bank to 40-year bonds, agency sources reported.
Director General of the Debt Management Office (DMO), Patience Oniha, said the measure would quarantine the debt into one-time restructuring repayable over 40 years with a moratorium, adding that government would seek approval of the National Assembly before the end of the year.
Earlier moves by the DMO to arrest worsening CBN debts since early 2021 was turned down by Buhari’s government who continued dipping into the CBN treasury for slush funds until March 2022 when the total government loan from the CBN reached all time N20 trillion.
The Oracle Today reports that the CBN loan further exacerbates a separate debt stock of N48.8 trillion declared by the DMO in June.
The move to covert the loans to bond comes as the Buhari government struggles to cope with worsening pressure arising from its borrowing spree and consequent debt spirals and inflationary jumps.
Also, the 40 year repayment tenure and preceding moratorium relieves the Buhari government of payment responsibility and plugs into the visible strategy of transferring debt liabilities to the next administration of the federal government.
President Buhari’s two tenures at the presidency lapses by may 2023 when a newly elected government is expected to relieve the country of the prevailing profligacy. However, his 2023 budget creates enormous opportunities for the present government to continue borrowing.
The CBN loan which stood at N20 trillion in August is feared to be increasing following indications from the Finance Minister, Zainab Ahmed, that part of the N5.33 trillion borrowed by the government between January and August might have come from the CBN.
She said government was borrowing partly to fund the 2022 budget deficit.
The Finance Minister declared at a briefing in Abuja the nation’s total debt stock would increase to about 35% of gross domestic product (GDP) from 23% after CBN loans are converted.
She said government plans to reduce the debt burden on government revenue from current 83% as of August to 50% in the medium-term and eventually to 30% in the long-term by boosting government income.
The historic debt overhang which started piling since 2015 when he was elected into office has been decried by stakeholder groups in the country as a mortgage of the country’s future.
