In the last six months of 2023, the Federal Government of Nigeria accessed a significant sum of N2.94 trillion from the Central Bank of Nigeria (CBN) through Ways and Means Advances, according to reports. This move follows a prior reduction in June 2023, which brought down the government’s debt to the CBN to N4.36 trillion. However, recent requests indicate a potential rise to N7.3 trillion, prompting discussions about the implications of such substantial borrowing.
The initial restructuring in June was intended to address the mounting criticism surrounding the 2023 elections. Despite this effort, concerns have resurfaced as President Bola Tinubu seeks approval to securitize the outstanding balance, suggesting a more extensive reliance on CBN funds.
The timeline reveals a noteworthy increase in the loan, with a surge of N3.42 trillion in five months, from N23.53 trillion in December 2022 to N26.95 trillion in May 2023. This indicates a potential total procurement of approximately N6.36 trillion from the CBN throughout the entire year.
Senate President Godswill Akpabio recently read a letter from President Tinubu during a Saturday plenary, emphasizing the government’s commitment to diversify its approaches and reduce dependence on Ways and Means Advances for domestic debt servicing. Tinubu stressed the urgency of securing approval for securitization before the end of 2023.
Nairametrics’ analysis revealed that the Federal Government spent around N3.23 trillion on domestic debt servicing in the first nine months of the year, with approximately N1.79 trillion expended between July and September 2023, according to data from the Debt Management Office (DMO).
The Ways and Means provision allows the government to secure short-term or emergency financing from the CBN to address cash flow gaps. Notably, a significant development occurred in May 2023 when both chambers of the National Assembly approved the securitization of N22.7 trillion from the N23.3 trillion previously advanced by the CBN. The debt, transferred to the Debt Management Office (DMO), carried a 40-year tenor, a 3-year moratorium, and a 9% interest rate.
Section 38 of the CBN Act, 2007, empowers the apex bank to grant temporary advances to the Federal Government to address temporary budget revenue deficiencies. The National Assembly introduced amendments to the CBN Act, raising the ceiling of Ways and Means Advances from five to 15% of the Federal Government’s previous year’s revenue, allowing more borrowing but also heightening debt service obligations.
Despite concerns about breaching statutory limits, the Senate approved the securitization of the outstanding N7.3 trillion in Ways and Means, aligning with President Tinubu’s request. This trend raises apprehensions about the potential adverse impact on future generations due to escalating borrowing and increased debt service obligations.