The Senate has approved the request by President Muhammadu Buhari to restructure the N22.7 trillion loans borrowed by the Federal Government from the Central Bank of Nigeria (CBN) through Ways and Means Advances.
BusinessDay had reported last week that with just over a month to the end of his tenure, Buhari’s debt conversion plan had not got off the ground.
In December, he sent a letter to the National Assembly seeking approval to convert N22.7 trillion to 40-year bonds that will be sold to investors at 9 percent interest, with a three-year moratorium.
The Senate considered the request on December 28, but failed to approve it after concerns were raised about the debt, with some lawmakers describing it as unconstitutional.
Few days later, Buhari urged the lawmakers to reconsider their stance on the proposed securitisation of the CBN loans, indicating that interrogation of the composition of the loans could be done after granting approval.
On January 17, the special committee set up by the Senate to liaise with the executive for necessary information on the debt said the attempts made to meet the CBN governor and the finance minister for the required details proved abortive. It asked for additional three days “for thorough work on the assignment and submission of the report.” But the plan was not approved before the lawmakers went on recess on January 25, ahead of the general election.
Leading the debate on the request Wednesday on the floor of the Senate, Ibrahim Gobir, the Senate leader, said that part of the money was given as loans to states.
He said the special committee set up by the Senate to scrutinise the fiscal document, did a “critical analysis and review of submissions made by the Federal Ministry of Finance, Budget and National Planning; and the Central Bank of Nigeria”.
He said: “The panel discovered that the Ways and Means balance was initially N19,326,745,239,660.20 as of 30th June, 2022 but later grew to N22,719,704,774,306.90 as of 19th December 2022 as a result of financial obligations to ongoing capital projects and additional expenditures which includes domestic debt service gaps and interest rate.
“The Senate on Wednesday, 28th December, 2022, approved the sum of N819, 536,937,813 from the N1 trillion additional request made by Mr. President, Commander-In-Chief of the Armed Forces leaving an outstanding balance of N180, 463,062,187 being the accrued interest on the sum.
“The House of Representatives had earlier approved the additional N1 trillion Ways and Means Advances requested by Mr. President Commander-In-Chief of the Armed Forces to enable the smooth implementation of the supplementary budget. Part of the Ways and Means monies were given to state governments as loans to augment budgetary shortfall in their various states.”
Gobir said most of the request for funds for increase in CBN loans were made to the President on the need to finance the budget due to revenue shortfall. “Such requests were either made by the Hon. Minister of Finance, Budget and National Planning or the Central Bank Governor.”
He said: “That the Federal Government as a result of revenue shortfalls occasioned by the COVID-19 pandemic and low oil prices, relied heavily on the Ways and Means to finance its budget deficit to keep the country working for the people.
“That the monies received by the Federal Government were actually used for funding of critical projects across the country.
“That due to the serious shortfall in Government Revenue, the Federal Government in order for the economy not to collapse, was compelled to borrow repeatedly from the CBN, exceeding the 5 percent threshold of the prior year’s revenue as stipulated by the CBN Act, 2007.”
He said the Federal Government, through the Ministry of Finance, Budget, and National Planning, has concluded plans to convert the CBN loans to tradeable securities such as treasury bills and bond issuance.
Gobir said: “The Senate Special Committee after exhaustive deliberations, recommended among others, the restructuring of N22, 719,703,774,306.90 for Ways and Means Advances be approved because the advances were made to ensure that the government does not shutdown;
“The panel further sought the approval of the Senate for the sum of N180,463,062,187 being the balance of the supplementary budget and the interest accrued on the Ways and Mean Advances.
“Other recommendations were that if there Is a need to exceed the 5 per cent threshold of the prior year’s revenue, recourse must be made to the National Assembly for approval;
“That the Federal Government should begin the process of recovering the portion of the Ways and Means given as the loans to state governments as further deferment of the repayment of the loans by the states will not be healthy for the economy.”
He said the Federal Government, through the Ministry of Finance, Budget and National Planning, should expedite action on the repayment of the loans through Treasury bills and bond issuances.
“That the National Assembly will not condone future increase in the Ways and Means without seeking the approval of the National Assembly,” he said.
In his contributions, Ahmad Lawan, Senate president, questioned the procedures and process adopted by the executive arm of government which failed to carry the National Assembly along while accumulating the huge amount of loans.
Approving the fiscal document, Lawan mentioned that the Ways and Means Advances was a global practice and that they must pass it so the Nigeria government would not be shut down.
He said: “The Senate had to pass the Ways and Means Advances so that the federal parliament would be able to consider and pass the 2022 Supplementary Budget still pending before the two chambers.
“The Ways and Means 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.
“Since the government started experiencing a significant shortfall in revenue, it has relied heavily on the central bank to finance its expenditure programmes via Ways and Means whose balance as of December 19, 2022 stood at N22.7 trillion. The Federal Government had said it will repay the loan with securities such as treasury bills and bonds issuance.”