FG proposes N2tn bonds to clear outstanding contractors’ debt

Nigeria’s Federal Government is proposing to issue bonds worth up to N2 trillion in 2017 to offset huge outstanding contractors’ liabilities. These bonds according to the government would have a 10 year maturity and the amortisation is expected to begin in 2018.

President Buhari while presenting the 2017 last Wednesday said huge contractor debt and other third parties was one such issues that the Federal Government is now committed to dealing with frontally even though it was not created by his government.

“We are at an advanced stage of collating and verifying these obligations, some of which go back ten years, which we estimate at about N2 trillion. We will continue to negotiate a realistic and viable payment plan to ensure legitimate claims are settled,” Buhari had said in his budget speech.

Udoma Udo Udoma, Minister of Budget and National planning while giving a breakdown of the proposed 2017 budget on Monday in Abuja, said the budget will focus on critical on-going infrastructure projects such as roads, railways, power, ICT and many other projects that have quick positive effects on the economy.

According to the minister, the 2017 Budget as an Infrastructure Budget, has a total of N1.047 trillion dedicated to key infrastructural spending.

But huge contractor debt is crippling the economy and frustrating efforts at enveloping the desperately needed infrastructure.

“To address contractors’ liabilities the Federal Government intends to issue over N2 trillion worth of bonds to clear outstanding contractors’ liabilities,” Udoma noted.

He said with regard to existing liabilities on bonds which were issued to contractors by past administration, Buhari’s government has set aside the sum of N177.46 billion in the 2017 budget as a sinking fund to retire the maturing bonds.

Analysis of the breakdown of the proposed budget shows that the largest capital allocation goes to Federal Ministry of Power, Works and Housing which gets N564 billion (7.7%), a figure which shows a 25% increase over 2016 estimate.

The second largest capital allocation as revealed by the breakdown is for the Ministry of Transportation which has the sum of N277 billion to execute various multi billion naira projects like the rail projects which are expected to gulp an estimated N213.14billion as well as the N2.47billion inland river port and supply of cargo handling equipment project at Baro, Niger state.