FG to Extend Loan Repayment to CBN, Converts N7.3trn Apex Bank Loan Into Debt
- Nigeria’s president's request to extend the outstanding N7.3 trillion naira Ways and Means has been approved.
- According to the letter sent to the senate, the development would translate into a decrease in the cost of debt service
- The letter clarified that the move is not to borrow more money but to the payback terms of current loans
Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market
President Bola Tinubu's proposal to securitize the outstanding N7.3 trillion Ways and Means has been approved by the Senate.
Source: Twitter
In Nigeria, Ways and Means is a method used by the Federal Government to raise funds through borrowing from the CBN.
Under the terms of the Ways and Means provision, the government may borrow from the Central Bank to finance delayed government-expected cash receipts or fiscal deficits.
Cost of debt to reduce
The President claimed that the securitization of Ways and Means would result in a decrease in the cost of debt service in the letter to the Senate.
In contrast to MPR, which is +3% annually, the securitized Ways and Means advances have a lower interest rate of 9% annually, according to the letter.
It added that the request is to prolong the payback terms of current loans and not a new borrowing. This means that the money will be converted to longer-dated bonds that will be added to the country’s debt according to Bloomberg.
This is amid report by the Debt Management Office (DMO) that Nigeria’s total public debt as of September 30, 2023, amounted to ₦87.91 trillion or $114.35 billion.
Recall that in may, the House of Representatives increased the limit within which the federal government can borrow from the Central Bank of Nigeria under the former president.
Charles Abuede said, the approval to extend the outstanding N7.3 trillion Ways and Means for Nigeria indicates a measure to manage short-term fiscal needs.
He said, "
The clarification that it's not about borrowing more money but adjusting payback terms suggests an effort to navigate existing financial obligations rather than seeking additional debt.
"This approach aims to maintain fiscal flexibility while addressing immediate financial requirements. The overall impact on Nigeria's economic stability will depend on effective fiscal management and the ability to meet repayment obligations."
Nigeria Successfully Repays Chinese, World Bank Loans as Debt Servicing Jumps by 277.64 Per Cent
Legit.ng reported that Nigeria spent about 277.64% on external debt servicing in Q3 of 2023, data from the Debt Management Office (DMO) shows.
An analysis of the data indicates that external debt servicing stood at $368.26 million in the second quarter of 2023.
The figure increased to $1.39 billion, showing a 277.64% rise in the three months under review.
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Source: Legit.ng
