Despite outrage at Wednesday’s Senate approval of President Muhammadu Buhari’s request to restructure the N23.7 trillion loan from the Central Bank of Nigeria (CBN) extended to the Federal Government under its Ways and Means (W&M) provision, the House of Representatives, yesterday, assented to the president’s controversial CBN overdrafts.
The W&M provision allows the government to borrow from the apex bank if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.
Recall that the Federal Government had said it would repay the loan, which as at December 2022 stood at N23.7 trillion with securities such as treasury bills and bonds issuance.
Buhari, had in December 2022, 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.
However, presenting the report at the Committee of the Whole yesterday, the House passed a resolution to approve same: “Approve the securitisation of the total outstanding W&M 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 report presented by three committees of finance, banking and currency, loans and aid management stood in the name of the chairman, committee on finance, James Faleke.
Similarly, at plenary, the ad-hoc committees in charge of investigating the volume of fuel consumed daily, and state of refineries, laid its findings and recommendations for consideration.
The committees, respectively chaired by Abdulkadir Abdullahi and Ganiyu Johnson, presented their various reports.
The Deputy Speaker, Idris Wase, who presided over the plenary, directed the clerk to make copies of the reports available for consideration on Tuesday.
Nigerians are indirectly paying the N23.7 trillion extra-budgetary spending, an economist, Adetilewa Adebajo, has said. According to him, citizens are paying the loan through raging inflation.
Adebajo, the chief executive officer of CFG Advisory, said the lending had been pushing up Nigeria’s inflation rate and making the cost of lending to banks go higher.
The economist, while discussing the economic challenges before the incoming administration of Bola Tinubu on Arise Television, stressed the importance of institutional reforms of the CBN, Ministry of Finance and the Ministry of Industry, Trade and Investment to drive economic growth.
He said: “There has to be alignment of monetary and fiscal policies. Lack of it was the greatest undoing of the current administration.
“Right now, the economy is not attracting enough capital inflow because of how poorly it has been managed. There is an under-performance of capacity even when Nigeria remains Africa’s largest economy.”
On the danger the Federal Government’s massive borrowings from CBN constitutes to the economy, Adebajo maintained that the inability to repay was responsible for rising inflation, rising cost of borrowing, and crowding out of the private sector from business.
The Federal government had at some point sought to securitise the debts, but economic experts condemned the move as unwise economically.
Adebajo advised the Federal government to adopt options within the Debt Management Office (DMO) Act to refinance N23.7 trillion of Nigeria’s total debts, instead of securitising it.
He proposed a resolution trust, a special purpose vehicle (SPV) backed by legislation within the current DMO Act and framework for refinancing of the nation’s burgeoning debts, as against securitising the ways and means of debt financing on the CBN balance sheet.
He suggested that the Federal government should, as a matter of urgency, stop financing the country’s debts through ways and means, which he described as “illegal.” – Guardian.