Information reaching Nairametrics suggests The National Assembly is in a session deliberating on how to increase the Ways and Means provision from 5% to 15%.
This is in a bid to collect an additional N1.2 trillion from the central bank which is an equivalent of 15% of last year’s budget of N8.2 trillion.
Contained in the draft bill seen by Nairametrics the provision seeks to amend section 38 of the CBN Act by substituting the words “five percent” with the words “Fifteen percent”.
The CBN Act 2022) Act (in this Bill referred to as the “Principal Act*) is amended as set out in this Bill:
Amendment of Section 38.
The Bill is also titled “REPORT OF A BILL FOR AN ACT TO AMEND THE CENTRAL BANK OF NIGERIA ACT C4 LAWS OF THE FEDERATION OF NIGERIA 2004 AND FOR OTHER MATTERS CONNECTED THERETO, 2023 (SB. 1125).”
Some members of the Nigerian Senate are said to be meeting to consider the bill. Our sources suggest the bill if approved might be signed by the Buhari administration before they hand it over on Monday 29th of May 2023.
If they convince the president to sign this bill, it will likely be his last major act under his regime, potentially labeling his administration as a debtor government. Public debt, inclusive of Ways and Means has risen to over N70 trillion under Buhari.
Ways and Means hit N26 trillion
Meanwhile, the Buhari Administration has collected an additional N4 trillion in Ways and Means in the last three months taking the total extra-budgetary printing to N26 trillion.
Nairametrics confirmed this detail from a reliable source familiar with the matter and who asked not to be mentioned as they were not authorized to speak about this.
At N4 trillion, the extra drawing of the government is already about 36% of the 2023 FG annual budgeted revenue of N11 trillion. Last year’s revenue target was N8.2 trillion thus almost 50% of the budget in Ways and Means drawings.
It is unclear if the additional N4 trillion will be added to the amount being securitized to pave way for a fresh N1.2 trillion in borrowing.
Ways and Means controversy
The Ways and Means provision allows the government to borrow from the Central Bank of Nigeria (CBN) if it needs short-term or emergency finance to fund delayed government expected cash receipts.
However, the provisions in the act set a limit on the financing of fiscal deficits at 5% of the prior year’s revenues.
Nevertheless, the government has breached this position over the years but to legalize the breach, the Buhari government presented a bill to the national assembly to approve the conversion of the loan into a national debt.
The National Assembly recently approved the securitization of Nigeria’s Ways and Means loans currently estimated at about N22.7 trillion, paving the way for the legislation of the controversial debt. The debt, which is for a tenure of 40 years, attracts an interest rate of 9% per annum with repayment of principal starting after 3 years.
The quest to increase it to 15% allows even more borrowing and more debt service obligation for the future generation of the country.
Fiscal Crisis
The 2023 Budget includes a budgetary expenditure of N21.8 trillion backed by an N11 trillion revenue and a deficit of N10.7 trillion.
- The deficit is to be financed by N8.8 trillion, Asset sales of N206.1 billion, and Multi-lateral/bilateral project-tied loans of N1.7 trillion.
- Most analysts believe the government will likely tap the central bank’s vault to fund some of the deficits considering the lengthy process involved in securing debt financing.
- The incoming Tinubu administration will also come under pressure in its first few months as it seeks funding to meet the expenditure remnants of the previous administration.
- This perhaps explains why there is pressure to open the CBN’s vault to borrow even more money.
More Ways and Means Spending.
While central bank data puts the Ways and Means spending at about N23 trillion as of January 2023, the source indicates additional spending of close to N4 trillion has spiked the total exposure to the central bank to a whopping N26 trillion.
- At a 9% interest rate per annum, the government will pay the central bank at least N2.3 trillion annually in interest just to service the debt in the first three years of the Tinubu administration.
- By 2026, the government will need to make its first loan repayment of N702 billion.
Update: The Senate has passed a bill approving the increase from 5% to 15%approving the increase from 5% to 15% of prior year’s budgeted revenue.
