CBN loans restructuring: ‘Nigeria’s debt to jump by nearly 50% over senate’s approval of Buhari’s request

Nigeria’s debt burden is set to jump by 50 per cent after the senate approved President Muhammadu Buhari’s request to convert N22.7 trillion (representing $49 billion) of loans from the Central Bank of Nigeria (CBN) into FGN Bonds and other securities.

It would be recalled that the senate, at its plenary, Wednesday, approved the request of President Buhari to restructure the N22.7 trillion loans which the Central  Bank of Nigeria (CBN) advanced the Federal Government under its ‘Ways and Means’ provision.

Though President Buhari has said the restructuring will save the country nearly N2 trillion in accruing interest in 2023 alone, the extension of loans repayment is, however, projected to shoot the country’s debt profile by almost double the current figure.

The Ways and Means provision allows the government to borrow from the regulatory bank if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.

Since the government started experiencing a significant shortfall in revenue, it has relied heavily on the central bank to finance its expenditure programmes via Ways and Means which balance as of December 19, 2022 stood at N22.7 trillion.

Federal Government had said it will repay the loan with securities such as treasury bills and bonds issuance.

Senate Leader, Ibrahim Gobir, who led the Senate in the debate for the approval of the Ways and Means on Wednesday, explained that part of the money were given as loans to states, adding that the Special Committee set up by the senate to scrutinize the fiscal document, put up the report after ‘critical analysis and review of submissions made by the Federal Ministry of Finance, Budget and National Planning; and the Central Bank of Nigeria.

According to him, “Part of the Ways and Means monies were given to State Governments as loans to augment budgetary short fall in their various States.”

Gobir said the Senate Special Committee after exhaustive deliberations, recommended the restructuring of N22, 719,703,774,306.90 for Ways and Means Advances be approved because the advances were made to ensure that the government does not shutdown.

The panel further sought the approval of the Senate for the sum of N180,463,062,187 being the balance of the supplementary budget and the interest accrued on the Ways and Mean Advances.

Other recommendations were, “That if there Is a need to exceed the 5 per cent threshold of the prior year’s revenue, recourse must be made to the National Assembly for approval; That the Federal Government should begin the process of recovering the portion of the Ways and Means given as the loans to State Governments as further deferment of the repayment of the loans by the States will not be healthy for the economy; That the Federal Government through the Ministry of Finance, Budget and National Planning should expedite action on the repayment of the loans through treasury bills and bond issuance; “That the National Assembly will not condone future increase in the Ways and Means without seeking the approval of the National Assembly.”

Remarking during the Wednesday plenary, Senate President, Ahmad Lawan, after the approval of the fiscal document, said the Ways and Means Advances was a global practice, even as he also faulted the process adopted by the executive arm of government which, he said, failed to carry the National Assembly along while accumulating the huge amount of loans.

“Senate had to pass the Ways and Means Advances so that the federal parliament would be able to consider and pass the 2022 Supplementary Budget still pending before the two chambers,” Lawan said.

However, in approving the restructuring of the CBN guaranteed loans, the Federal Government argued that a staggering N1.8 trillion in additional interest, this year may be incurred.

It would be recalled that Buhari had in December, 2022 requested the Senate to approve his proposal to restructure the loans but the Red Chamber rejected the request, citing lack of details.

And, while appealing to the Senate to reconsider its stand, President Buhari said failure to grant the securitisation approval will however cost the government about N1.8 trillion in additional interest in 2023.

This is, however, as the senate’s acceptance of Buhari’s proposal is expected to push the country’s official debt-to-gross domestic product ratio toward a 40 per cent limit set by the Federal Government.

The additional interest on the loans is projected to drive the country’s existing N22 trillion loans by about double the previous figure in one year alone.

Nigeria’s current administration has borrowed in excess of legal threshold.