Article Summary
- Economists react to the approval of the Senate to convert Ways and Means advances to debt.
- It will be an opportunity to suck liquidity out of the system since the amount will be transmuted to debt and sold as bonds to the public.
- The ways and means advances by the Central Bank of Nigeria to the federal government have been a funding option for the federal government to cater for short-term or emergency finance to fund delayed government-expected cash receipt of fiscal deficit.
Following approval from the Nigeria Senate of the sum of N22.7 trillion that was spent by the executive arm of government without the initial approval of the National Assembly, to be converted to debt, there have been reactions from economists.
The approved funds borrowed by the federal government from the Central Bank of Nigeria (CBN) through ways and means advances, have been a subject of dispute between the executive arm of government and some members of the National Assembly, especially the opposition members.
Economists’ opinions
Reacting, the chief executive of Economic Associates, Dr Ayo Teriba, said the approval was expected. He recalled that he had written on the issues earlier and maintained that the securitized funds will make no difference in the country’s finances.
However, the chief executive of Anthill Concepts Limited, Dr Emeka Okengwu, said the implication is that Nigeria’s debt profile has increased. He also said the effects of the N22.7 trillion on the Nigerian economy would depend on what the Ways and Means funds were used for.
He said if it was used to build infrastructure or invest in any projects that would bring returns then the effects will be felt in the future. But if the funds were used for consumables, then the effects are already felt in the ministries.
Acquiescing Okengwu’s position, an economic affairs analyst, Dr Godwin Oputa, said Nigeria would be further indebted, which would choke the country’s ability to service her debt as and when due. He also said the additional N22.7 trillion added to the debt profile would scare lenders and make the cost of borrowing more for Nigeria.
However, the chief executive of the Center for the Promotion of Private Enterprise, Dr Muda Yusuf, said he’s not sure whether the economy can absorb a N22.7 trillion debt. He noted that basically the books of the CBN will change, and the burden of debt will be transferred to the Debt Management Office.
He also said with the N22.7 trillion securitized, it will be an opportunity to suck liquidity out of the system since the amount will be transmuted to debt and be sold as bonds to the public.
He however cautioned that it may be difficult to sell such bonds to the public at 9% over a period of 40 years, considering an inflation rate of 22% annually.
He also questioned the idea of approving the bill considering the unconstitutionality of it. He said it’s like legitimizing something that is illegal, stressing that it’s a major breach of the constitution and a major violation of the CBN Act.
The upper legislative chamber approved the request on Wednesday during plenary, after the senate leader, Ibrahim Gobir, presented a report to the committee of the whole.
Some beneficiaries
Gobir said some of the beneficiaries of the funds are the Office of the Accountant-General of the Federation, the Ministry of Foreign Affairs (ECOWAS National Unit), Nigeria Bulk Electricity Trading, Azura Power West Africa, Niger Delta Power Holding Company, and Accugas Limited.
Perspective
President Muhammadu Buhari had in a letter to the Senate in December 2022, requested for the approval of the upper legislative chamber for N22.7 trillion Ways and Means advances.
The Ways and Means are advances (or funds) from the Central Bank of Nigeria (CBN) to the federal government for emergency funding of delayed receipt of fiscal deficit.
Buhari in the letter said:
- “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 N22.7 trillion.”
This led to a rowdy session in the upper legislative chamber with the senators who kicked against it, demanding that the records of what the funds were spent on be presented to the senate before it can give approval to the request.
Following the uproar the request caused by the request, the senate suspended its consideration with the senate president, Ahmad Lawan, appointing Gobir to chair an ad hoc committee and liaise with relevant ministries, departments and agencies (MDAs) on the spending.
Though the Gobir-led panel was meant to have turned in its report in January, it was only able to do so at Wednesday’s sitting.