The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has announced that the federal government has settled a swooping N7.3 trillion in ways and means advances to the Central Bank.
Edun made this statement during an interview with Channels TV on Sunday in Abuja.
The Minister stated that the country is no longer reliant on borrowed funds for its projects, nor is it falling behind in its repayments to international creditors.
Edun noted that the federal government has repaid hundreds of millions of dollars to international banks, thereby maintaining the country’s reputation with international financiers.
“Nigeria is no longer living on borrowed money. It is no longer living on drawing ways and means. We have paid back 100 of millions of dollars to international banks. We have kept the reputation of the country intact.
“We have paid back N7.3 trillion of outstanding overdue obligations. That is overdraft at Central Bank. The government has really put in place a robust mechanism not just on revenue, but on expenditure to ensure that Nigeria’s money is spent feasibly, transparently and accountably,” Edun said.
FG not influenced by Bretton Woods Institutions
Addressing questions about whether the federal government is being swayed by Bretton Woods Institutions like the International Monetary Fund (IMF) and the World Bank, Edun clarified that this is not the situation.
He explained that the perception that these institutions impose stringent conditions for loans isn’t entirely accurate, noting that the financing options they provide are concessionary.
Edun added that the loan from the World Bank to Nigeria does not come with any conditions, describing it as essentially “free money.”
“The view of Nigerians as well as developing countries in general is that the Brentwood Institutions are not giving the necessary support that these countries deserve or the sufficient fundings.
“But having said that, I think the opposite is the case. These institutions offer relatively cheap financing. The money is virtually free for about 40 years.
“What Nigeria has done is encouraging the support and commitment of them that are able to fund these cheap loans. In two weeks, the World Bank will consider a $2.25 billion package for Nigeria for virtually free grant funding,” Edun added.
Backstory
Recall that in May 2023, shortly before the end of the Buhari government, the Senate approved the request of the then President to restructure the N22.7 trillion loans the Central Bank of Nigeria (CBN) extended to the Federal Government under its Ways and Means provision.
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, stakeholders and financial experts had criticized former President Muhammadu Buhari for exacerbating the country’s debt burden by securing over N22.7 trillion in Ways and Means Advances from the apex bank.
Section 38 of the CBN Act states that funds the federal government can borrow must not exceed 5% of the previous year’s actual revenue of the government. However, the loans received by the FG under Ways and Means exceeded the previous year’s revenue.
It states, “(1) Notwithstanding the provisions of section 34 (d) of this Act, the Bank Advances may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate of interest as the Bank may determine,”
In 2022, for instance, the actual revenue generated by the Federal government was N6.49 trillion whereas ways and means advances stood at N6.2 trillion, representing 138% of the 2021 revenue.
