The Senate has approved and confirmed the securitization of the outstanding 7.3 trillion naira in Ways and Means, as per President Bola Tinubu’s request.
Tinubu wrote to the Red Chamber, urging them for swift approval in securitizing the outstanding debit balance of N7.3 trillion in the consolidated revenue fund.
Senate President, Godswill Akpabio, during Saturday’s plenary, read a letter from the president seeking approval on the Senate floor.
The president mentioned in his letter that, while the federal government is exploring different approaches to prevent the reliance on ways and means advances for domestic debt servicing, it is crucial to prioritize the securitization of the existing ways and means advances to the federal government by the end of 2023.
According to the letter sent to the Senate, the President emphasized that securitizing Ways and Means could lower the debt service cost.
Furthermore, the letter stated that the interest rate for the securitized Ways and Means advances has been reduced to 9% per annum, a decrease of 3% compared to the Monetary Policy Rate (MPR)
- “In view of the foregoing, the Senate is invited to consider and approve securitization of the outstanding debit balance of N7.3 trillion in the CNRF as of December 11 2023”, the letter outlined.
The president added that the savings arising from the lower interest rate will reduce the deficit in the budget.
What you should know
- The Ways and Means provision enables the federal government to secure short-term or emergency financing from the Central Bank, addressing the need to fund delayed cash receipts resulting from fiscal deficits.
- The request which is not a new borrowing is to extend the repayment period of the existing loans.
- The terms of the securitization of the Ways & Means advances as gazetted by the Debt Management Office (DMO) involve the issuance of debt securities with a 40-year tenor by the Federal Government to the CBN, with an interest rate of 5% and a 3-year moratorium on principal repayments.
- According to on the 2024 MTEF, the total budget for 2023 including supplementary stands at 24.82 trillion.
- With a N7.3 trillion ‘Ways And Means’ advance which is approximately 29.36% of the total 2023 budget, the loan exceeds the approved 15% of the budget, as stated in the amended CBN Act of 2007.
- Accordingly, the 15% of N24.82 trillion would be N3.723 trillion, meaning the federal government exceeded the statutory requirement by N3.577 trillion or 96.08%.
Fuel hike price. May Almighty God conquer the Pharaoh in Nigeria.