More revelations on why the 2023 national budget may not give Nigerians the desired relief have emerged from the latest World Bank 2022 edition of Nigeria Development Update.
This stemmed from the fact that the world apex bank has projected that interest payments on the Federal Government’s borrowing from the Central Bank of Nigeria will gulp about 62 per cent of government revenue by 2027 despite the restructuring plan.
Besides, the Bank averred in its Update that endless insecurity, parallel forex crisis and other structural challenges have continued to make foreign investment nose-dive steadily.
The World Bank report read in part, “Despite the restructuring of the Ways and Means stock in 2023, interest payments are projected to steadily increase by 2.4 percentage points of GDP between 2018 and 2027, and by 2027 interest payments will account for over 62 per cent of revenues.”
Recall that the Federal Government had borrowed N6.31tn from the CBN through Ways and Means Advances in 10 months. Ways and Means Advances is a loan facility through which the CBN finances the shortfalls in the government’s budget.
This pushed the Federal Government’s borrowing from the CBN from N17.46tn in December 2021 to N23.77tn in October 2022.
The N23.77tn owed the apex bank by the Federal Government is not part of the country’s total public debt stock, which stood at N44.06tn in the third quarter of 2022, according to the Debt Management Office.
The public debt stock only includes the debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory.
Only last week, the President Muhammadu Buhari, transmitted to the National Assembly, a request for approval of Ways and Means Advances restructuring to the tune of N23.7tn.
At the plenary on Wednesday, President of the Senate, Ahmad Lawan; and Speaker of the House of Representatives, Femi Gbajabiamila, read out Buhari’s request to members of the respective chambers.
In the request titled ‘Restructuring of Ways and Means Advances,’ the President wrote, “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.
“The Ways and Means balances as of 19th December, 2022, is N23,719,703,774,306.90. I have approved the securitisation of the Ways and Means balances along the following terms: amount, N23.7tn; tenure, 40 years; moratorium on principal repayment, 3 years; pricing interest rate, 9 per cent. Your concurrence and approval is sought to allow for the implementation of the same.”
However, the Senate rejected the request by the president to restructure the N23.7tn Ways and Means advances.
Business Hilights recalls that the World Bank had, in November last year, warned the Nigerian government against financing deficits by borrowing from the CBN through the Ways and Means Advances, saying this put fiscal pressures on the country’s expenditures.
But despite warnings from experts and organisations, the Federal Government has kept borrowing from the CBN to fund budget deficits.