The House of Representatives on Thursday approved an additional N1 trillion in Ways and Means advances for the implementation of the 2022 Supplementary Appropriation Act as passed by the Nation Assembly.
The Ways and Means provision allows the government to take loans from the Central Bank of Nigeria (CBN).
This followed the consideration of the report of the House Committees on Finance, Banking and Currency and Aids, Loans and Debt Management on the Restructuring of Ways and Means Advances, which was laid before the Committee on Supply by its Chairman, Hon. James Faleke .
Also, the Debt Management Office (DMO) explained the modality for the restructuring of the outstanding Ways and Means.
As part of the restructuring arrangements, the DMO said that the securities would be issued only to the CBN by the Federal Government of Nigeria (FGN), while members of the public have been excluded from acquiring the securities.
The DMO further clarified that “the securitisation of the Ways and Means Advances does not involve new money being given to the FGN as the CBN had already provided the funds to the FGN”.
The House approved the securitization of the total outstanding Ways and Means amount the terms: “Amount, N23,719,703,774,306.90; tenure, 40 years; moratorium on principal repayment, three years; and pricing or interest rate fixed at 9.0 per cent per annum”
Last December, President Muhammadu Buhari had written to seek the House for approval for the advance of the N1 trillion from the CBN’s Ways and Means.
The President said that the Ways and Means Advances by the CBN to the FGN has been a funding option to cater for short-term, or emergency finance to fund delayed government expected cash receipt of fiscal deficit.
The N22.7 trillion is money borrowed by the FGN from the CBN through the “Ways and Means advances”.
President Buhari had asked the Senate to approve the sum in December 2022, but it was opposed by some Senators, who asked that records of what the funds were spent on be provided before approval is given to his request.
“The ways and means advances by the Central Bank of Nigeria to the Federal Government has been a funding option to the Federal Government to cater for short-term or emergency finance to fund delayed government-expected cash receipt of fiscal deficit”, President Buhari wrote.
“The ways and means, balances as at 19th December 2022 is N22.7 trillion”.
Following the disagreement the request caused in the Senate, its president, Dr. Ahmad Lawan appointed Senate Majority Leader, Senator Abdullahi Ibrahim Gobir to chair an ad-hoc committee and liaise with relevant Ministries, Departments, and Agencies (MDAs) on the spending.
Although the Gobir-led panel was meant to have turned in its report since January, it was only able to do so at Wednesday’s sitting.
In the meantime, President Buhari asked the Senate to securitise the N22.7 trillion Ways and Means loan, saying it would cost the Federal Government about N1.8 trillion in interest if the National Assembly failed to approve N22.7 trillion in extra-budgetary spending.
DMO’s Director-General Patience Oniha said the securitisation of the ways and means advances would enable the agency to include the debt in the public debt stock, thereby, improving debt transparency.
Using the actual public debt stock of N44 trillion as a basis, Oniha projected that the country’s public debt would hit N77 trillion if the CBN loan was included.
The DMO highlighted the benefits of securitisation including: improving Nigeria’s transparency as the securitised Ways and Means Advances will now be included in the public debt statistics.
“It will reduce the debt service cost as the new interest rate is nine per cent p.a. compared to the Monetary Policy Rate plus three per cent which translates to 20.5 per cent p.a.-MPR – 18.5 per cent+ 3 per cent, currently being charged on the Ways and Means Advances”, DMO stated.
The agency noted that “the large savings arising from the much lower interest rate will help reduce the deficit in the Budget and expectedly, the level of New Borrowings”.
Also as part of the restructuring agreement, the DMO noted that the Federal Government would start paying the nine per cent interest in 2023. According to the DMO “provisions for interest on the securitised Ways and Means Advances, starting from 2023, and principal repayments starting from year four, will be made in the annual FGN budgets”.
