The World Bank has projected that interest payments on Federal Government loans from the Central Bank of Nigeria will absorb around 62 percent of government revenue by 2027 despite the restructuring plan.
The Washington-based bank noted this in its recently released December 2022 issue of the Nigerian Development Update.
The report said in part: “Despite the restructuring of Ways and Means shares in 2023, interest payments are projected to rise steadily by 2.4 percentage points of GDP between 2018 and 2027, and by 2027 interest payments interest will represent more than 62 percent of income.”
the punch recently reported that the Federal Government borrowed N6.31tn from the CBN through Ways and Means Advances in 10 months.
This caused the federal government to borrow from the CBN from N17.46 trillion in December 2021 to N23.77 trillion in October 2022.
The 23.77 trillion naira that the federal government owes the main bank is not part of the country’s total stock of public debt, which stood at 44.06 trillion naira in the third quarter of 2022, according to the Office of Credit Management. Debt.
The public debt stock only includes the debts of the Federal Government of Nigeria, the 36 state governments and the Federal Capital Territory.
Ways and Means Advances is a lending service through which the CBN finances deficits in the government budget.
The World Bank, in November last year, warned the Nigerian government against financing deficits by borrowing from the CBN through the Advance Ways and Means, saying this put fiscal pressures on the country’s spending.
Despite warnings from experts and organizations, the Federal Government has continued to borrow from the CBN to finance budget deficits.
the punch had reported that the Federal Government paid interest of N2.03tn from January 2020 to November 2021 on the loans it obtained from the CBN through Ways and Means Advances.
It was also reported that the Federal Government paid interest of N405.93bn from January 2022 to April 2022 on the loans it obtained from the CBN.
Managing Director/CEO of Cowry Asset Management Limited, Mr. Johnson Chukwu, recently said that central bank lending to the government was putting pressure on the exchange rate and the rate of inflation, with “liquidity having no associated productivity entering the system.”
Meanwhile, last week, the President, Maj-Gen Muhammadu Buhari (ret), conveyed to the National Assembly a request for approval of the restructuring of Ways and Means Advances to the tune of N23.7tn.
In the plenary this Wednesday, the president of the Senate, Ahmad Lawan; and the Speaker of the House of Representatives, Femi Gbajabiamila, read Buhari’s request to the members of the respective houses.
In the application titled “Restructuring Ways and Means Advances”, the President wrote: “Ways and Means Advances from the Central Bank of Nigeria to the Federal Government have been a funding option for the Federal Government to address short-term needs. or emergency.” Finance to finance the expected cash receipt by the delayed government of the fiscal deficit.
“The balances of means and taxes as of December 19, 2022 are N23,719,703,774,306.90. I have approved the securitization of the balances of Ways and Means in the following terms: amount, N23.7tn; tenure, 40 years; moratorium on principal payment, 3 years; pricing interest rate, 9 percent. Your concurrence and approval are sought to allow its implementation.”
However, the Senate rejected the president’s request to restructure the progress of Ways and Means N23.7tn.