Prominent economists, as well as the Nigeria Employers’ Consultative Association and opposition parties, have criticized President Major General Muhammadu Buhari (retd.) and the Senate for the approval of the government’s N22.7tn extra-budgetary spending, which was authorized by the upper legislative chamber on Wednesday.
While groups such as NECA and the Lagos Chambers of Commerce and Industry questioned the reasoning behind the loan by a regime nearing its end, economists described the Senate’s approval as unusual in separate interviews with The PUNCH.
The Senate’s approval of the N22.7tn loan from the Central Bank of Nigeria, granted to the Federal Government under its Ways and Means provision, will cause Nigeria’s external debt to increase to N68.95tn.
The Debt Management Office recently disclosed that Nigeria’s overall public debt stock rose to N46.25tn in the fourth quarter of 2022, consisting of the total debt stocks of the Federal Government, sub-national governments (36 state governments and the Federal Capital Territory), and both domestic and foreign debts.
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The Senate granted President Buhari’s request for a restructuring of N22.7tn in Ways and Means Advances on Wednesday, which contributes to the current debt stock.
The Ways and Means provision permits the government to borrow from the central bank for short-term or emergency financing to cover fiscal deficits due to delayed government cash receipts.
Since the government has faced a significant revenue shortfall, it has relied heavily on the central bank to fund its spending programs through Ways and Means. The Federal Government has stated that it intends to repay the loan using securities such as treasury bills and bonds.
Last year, Buhari proposed the secularization of the loan to the Senate, but the request was rejected due to a lack of details. Buhari appealed to the Senate to reconsider its decision, warning that failing to approve the securitization would result in the government incurring an additional N1.8tn in interest in 2023.
Senate Leader Ibrahim Gobir, who led the Senate in the debate for the approval of Ways and Means on Wednesday, clarified that part of the money was loaned to states.
According to Gobir, the Senate established a Special Committee to examine the fiscal document and compile a report based on a thorough analysis and review of submissions made by the Federal Ministry of Finance, Budget, and National Planning and the CBN.
The Senate Leader explained that the panel found that the initial Ways and Means balance was N19.33tn as of June 30, 2022, but increased to N22.72tn as of December 19, 2022, due to financial obligations to ongoing capital projects and additional expenditures, including domestic debt service gaps and interest rates.
He noted that on December 28, 2022, the Senate approved N819.54bn from the additional N1tn requested by the President, leaving an outstanding balance of N180.4bn as accrued interest on the sum.
Gobir justified the borrowing by stating that the House of Representatives had already approved the additional N1tn Ways and Means Advances requested by the President to facilitate the smooth execution of the supplementary budget.
He also revealed that part of the Ways and Means funds was given to state governments as loans to supplement budgetary shortfalls in their respective states. Gobir emphasized that most of the requests for additional funding were made by either the Minister of Finance, Budget, and National Planning or the CBN Governor due to revenue shortfalls.
