May 05, (THEWILL) – Like the upper legislative chamber, the Senate, the House of Representatives on Thursday approved the request by President Muhammadu Buhari to restructure the N22.71 trillion Ways and Means advances the Central Bank of Nigeria (CBN) extended to the federal government.
By this development, the nation’s total debt profile has climbed to N69 trillion as of December 31, 2022, made up of N46.23 trillion of the federal and sub-national governments and the N22.71 trillion Ways and Means.
The Ways and Means advances are short-term loans provided by the Central Bank of Nigeria to the Federal Government to meet its temporary cash flow mismatches. It is an important tool that allows the government to manage its cash balances and meet its financial obligations in the short term. Usually, it involves printing of money.
The Central Bank of Nigeria’s advances to the federal government rose 2900 per cent in the last seven years to N23. trillion, an unprecedented rise that violated the law, stoked inflation and worsened the country’s debt burden.
Central banks sometimes help governments to fund budget deficits, but such loans, called Ways and Means Advances, are tightly controlled as they can fuel inflation and distort monetary policy.
In May 2015 when the Buhari administration came to office, the CBN’s loans to the federal government stood at N789.7 billion cumulatively. Since then, the government has drawn central bank loans each year at an unprecedented level.
Between January and October 2022 alone, the government drew N5.6 trillion. By comparison, between December 2012 (the earliest date the CBN has released data for) and May 2015, a period of two and half years, ways and means advances rose by N654.9 billion.
As his administration winds down, President Muhammadu Buhari made an attempt in January to obtain a delayed approval for the loan that had already been spent, causing an uproar in the Senate.
The Federal Government had said it would repay the loan, which as at December 2022, stood at N22.7 trillion, with securities, such as treasury bills and bonds issuance.
Buhari in December last year asked both chambers of the National Assembly to approve his proposal, but the lawmakers, who had promised to consider the request before proceeding for the election break, failed to list it for consideration during plenary in January.
The lawmakers had rejected the request and accused the President of violating the constitution. They also demanded details of how the money was spent.
All that appeared to have fizzled out as the ninth National Assembly gets set to wind down in June 2023. .
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The Federal Government had said it would repay the loan, which as at December 2022, stood at N22.7 trillion, with securities, such as treasury bills and bonds issuance.
Presenting the report at the Committee of the Whole earlier, the relevant committees said, “That the House considered the Report of the Committees on Finance, Banking and Currency and Aids, Loans and Debt Management on the Restructuring of Ways and Means Advances and approved the recommendations therein (Laid: 2/5/2023), approve the requested additional N1 trillion Ways and Means advances for the implementation of the 2022 Supplementary Appropriation Act as passed by the National Assembly.
“Approve the securitisation of the total outstanding Ways and Means amount under the following terms: amount N23,719,703,774,306.90, Tenor 40 years Moratorium on Principal Repayment three years, pricing/Interest Rate nine per cent per annum.”
The World Bank had revealed that Nigeria spent 96 percent of its revenue on debt servicing in 2022.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
