The Federal Government is indebted to the Central Bank of Nigeria (CBN) to the tune of N20 trillion, the Minister of Finance, Budget and. National Planning, Mrs. Zainab Ahmed has disclosed.
She disclosed this on Tuesday in Abuja during the public presentation of the 2023 budget estimates.
The Minister also revealed the plan by the federal government to raise bonds to repay the CBN debt over a 40-year period.
This repayment plan contravenes the provision in the CBN Act 2007 guiding CBN lending to the government.
“”The total Ways and Means (CBN lending to the FG) today is N20 trillion and we have approval to securitize and the securitization will be over in 40-year period with an interest rates of 9 percent. But over the years, we have been paying interest component and the current rate that is charged on the ways and means” the Minister said.
But the CBN Act of 2007 prohibited such repayment plan in Section 38 (3b).
The Act states in Section 38 (1) that “Notwithstanding the provisions of section 34 (d) of this Act, the Bank 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.”
(2) “The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.”
(3) “AlI Advances made pursuant to this section shall be repaid- (a) as soon as possible and shall in any event be repayable by the end of the Federal Government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the Bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid, and (b) in such form as the Bank may determine provided that no repayment shall take the form of a promissory note or such other promise to pay at a future date or securitization by way of issuance of treasury bills, bonds, certificates or other forms of security which is required to be underwritten by the Bank.”
Thus the repayment plan by the FG will suffer a huge setback and perhaps set it up on the part of fiscal crises as the CBN might not lend to the FG anymore.
The debt profile of the Federal Government currently stands at N42.85trn and based on the over N10.78trn. this should push FG’s debt to over N52trn in 2023.
The FG revenue projections for 2023 stands at about N9 trn in the N20.5 trillion.
Speaking on subsidy, the minister said the FG has provided N3.3trn as subsidy for 2023 fiscal in spite the shallow revenue position of the FG.
She said: “We have provided N3.3trn to be used for fuel subsidy. For us on the fiscal side, it’s not something we should be doing. But we live in a nation and we have different arms of government so we will have to do what is practical.”
On education, she said N2.0 trillion has been provided for the education sector including N470bn to pay the increment portion of the adjustment of salaries for lecturers as well as the revitalisation that was negotiated with ASUU. This is in addition to the regular salaries. If you factor in that, the total package will be N515 billion she noted.