…if Senate fails to approve Buhari’s securitisation request
Nigeria may be spending an additional N1.8 trillion-N2.2 trillion (unbudgeted sum) to service a N23.7 trillion loan it took from the Central Bank of Nigeria (CBN) if the National Assembly fails to approve securitization of the loan.
The loan, representing CBN’s Ways and Means advances to the Federal Government, was taken to partly service outstanding debt stock and augment some recurrent expenditures. The loan has expanded the CBN’s liability in its balance sheet.
President Muhammadu Buhari had requested the National Assembly to approve the conversion of the N23.7 trillion overdrafts to 40-year bonds at 9 percent interest to lighten the burden of cost of debt service on the government. But the legislators have not reached a decision on the request.
Nigeria’s total debt stock stood at N44 trillion as at September 2022. Add that to the deficit of N11.34 trillion in the N21.82 trillion 2023 budget and the expected issuance of about N5 trillion Promissory Notes, the nation’s total debt stock would rise to about N72 trillion, according to director-general of the Debt Management Office, Ms Patience Oniha.
The public debt is an aggregation of the debts owed by the Federal Government, 36 state governments and the Federal Capital Territory.
Speaking at the public presentation and breakdown of the highlights of the 2023 Appropriation Act in Abuja on Wednesday, Minister of Finance, Budget and National Planning, Zainab Ahmed, said it would be dangerous for the lawmakers to decline the approval, considering the financial implication.
Ahmed said if the approval was given, it would bring a significant fiscal relief to the Federal Government in addition to significant cost savings in debt service that will be derived by securitizing it. Currently, the Ways and Means is running at 16.5 percent official interest rate (MPR+3) which currently is averaging about 18.5 percent. That’s a very high cost.
However, if the approval is not given, the finance minister said, “We will end up with interest rate accruing again and adding to the Ways and Means – anything from N1.8 trillion to about N2.2 trillion.
“Once that approval is given, we will benefit from lower interest cost of nine percent and we will benefit from a fresh negotiated plan that we have made of 40 years with a three-year moratorium. That will provide very significant fiscal relief to the federal government.”
President Buhari had also, while signing the 2023 budget on Tuesday, asked the legislators to reconsider their stance on his request regarding the outstanding Ways and Means Advances.
The President warned that if approval was not granted for the securitisation of the overdrafts, it would cost the government about N1.8 trillion in additional interest in 2023 and a 40-year repayment period on the securitised debt.
In the event that the National Assembly fails to approve Buhari’s request, it is not clear yet where the expected cost of servicing the loan to CBN will come from since it was not captured in the 2023 national budget.
