The Federal Government of Nigeria’s interest payment on Ways and Means debt to the Central Bank of Nigeria (CBN) in the first half of 2023 surpassed the revenue it generated from crude oil, a report from the Budget Office of the Federation (BOF) has revealed.
The report, titled “Medium Term Expenditure Framework and Fiscal Strategy Paper,” which was released on Thursday, revealed that the CBN Ways and Means payment of N1.68 trillion exceeded the FG’s crude oil revenues of N813.58 billion, which is an excess of 107 percent over oil revenue.
The BOF explained that the FG’s debt service situation worsened due to the surge in Ways and Means payments, which increased by N966 billion from the first half of the year’s budgeted amount of N700 billion to N1.68 trillion, an amount that also exceeded the 2023 budgeted amount of N1.2 trillion by over N400 billion.
This component in our debt service account was single-handedly responsible for driving total debt services for the first half of the year by N109 billion, hitting N3.94 trillion in the process—an amount that exceeded the 2023 budgeted amount of N3.8 trillion.
However, a further examination of the account showed that other debt service components outside the Ways and Means payment saw significant decreases.
Foreign loan servicing decreased by 49 percent, or N528 billion, reaching N530 billion from the budgeted first-half amount of N1.06 trillion, while domestic debt service charges dropped by 11.1 percent, or N214 billion, settling at N1.7 trillion from the budgeted N1.9 trillion for the first half of 2023.
BOF said, “Debt service costs exceeded budget by N1.68 trillion, mainly due to interest on Ways and Means of N1.89 trillion and generally higher interest rates on borrowings.”
However, the report read, “As of July 2023, FGN’s retained revenue was N5.19 trillion, approximately 80.5% of the prorata target of N6.44 trillion. The FGN share of oil revenues was N813.58 billion (62.6% performance), while non-oil tax revenues totalled N1.84 trillion (a performance of 127.7%).
“CIT and VAT collections were N1.16 trillion and N234.30 billion, representing 212.4% and 104.8% of their respective targets. Customs collections (made up of import duties, excise and fees, as well as federation account special levies) recorded N432.96 billion out of N651.46 billion (66.5% of target).
“Other revenues amounted to N2.49 trillion, of which independent revenue (mostly transfers from GOEs and MDAs) was N1.04 trillion.”
CBN Ways and Means borrowing became not only a highly controversial and debatable financial instrument of the former Nigerian President Muhammadu Buhari but, according to some sources, heavily abused as it violated Section 38(2) of the CBN Act.
The CBN Act states that “the total amount of such advances outstanding shall not at anytime exceed five percent of the previous year’s actual revenue of the Federal Government.”
A report from Dataphyte revealed that Buhari exceeded the five percent limit, increasing ways and means from N856 billion to N23.8 trillion, marking a significant growth of 2,635 percent over a span of seven years.
It went on further to say that in 2017, actual revenue amounted to N2.7 trillion, whereas ways and means reached N1.1 trillion, equivalent to 37.2 percent of the prior year’s revenue, N2.95 trillion. This departure from Section 38(2) of the CBN Act is evident.
Moving to 2018, actual revenue tallied at N3.87 trillion, while ways and means were estimated at N2.1 trillion. Ideally, Buhari’s administration should have limited ways and means to N135 billion, equivalent to five percent of the N2.7 trillion revenue of 2017, as expected by law. However, ways and means amounted to a staggering 77.8 percent of the preceding year’s revenue.
In 2019, actual revenue increased to N4.12 trillion, yet ways and means surged to N3.3 trillion, representing a significant 85.27 percent of the 2018 revenue.
The trend continued into 2020, with actual revenue reaching N4.04 trillion, while ways and means soared to N4.4 trillion, surpassing the previous year’s revenue by 7 percent, highlighting Buhari’s reliance on CBN borrowing.
In 2021, actual revenue was N4.64 trillion, with ways and means amounting to N4.3 trillion, accounting for 106.4 percent of the 2020 revenue. In 2022, actual revenue reached N6.49 trillion, while ways and means advances stood at N6.4 trillion, representing a remarkable 138 percent of the 2021 revenue.
The findings of this report, particularly the influence of the Ways and Means payment on the Federal Government’s debt service, have sparked significant discussions on X, formerly known as Twitter.
Kalu Ajah, a finance expert, tweeted, “Warning: read this tweet sitting down. Nigeria, January to July 2023 Oil revenue: N813b Interest on W&M: N1.69t* *CBN lending to FGN So, Buhari and Emefiele left Nigerians with an interest charge that is MORE than oil revenues.”
Oluseyi @OluseyiIdowu, reacting to Ajah’s tweet, warned that Nigeria is “dangerously hanging on the cliff” as a result of these expenses. He tweeted, “Oil revenue was not the only revenue of the FG during the period. FG made 5 trillion but has spent 8 trillion. The question to ask is how this deficit was financed. New ways and means, or foreign debts. Whichever way, Nigeria is dangerously hanging on the cliff.”
Apparently, Saidu Imran, an automotive engineer responding to Ajah’s tweet, asked if the Federal Government can’t just “cancel the entire loan facility as if nothing happened?” to which Ajah replied that “CBN is not a federal government agency.”