Buhari’s N22.7trn debt conversion plan stuck in limbo
AREWA AGENDA – With just over a month to the end of his tenure, President Muhammadu Buhari’s plan to restructure the debt owed to the central bank has not got off the ground. Lawmakers have yet to give it the green light.
Four months ago, Buhari sent a letter to the National Assembly seeking approval to convert N22.7 trillion borrowed from the Central Bank of Nigeria (CBN) to 40-year bonds that will be sold to investors at 9 percent interest, with a three-year moratorium.
The Senate considered the request on December 28, but failed to approve it after concerns were raised about the debt, with some lawmakers describing it as unconstitutional.
Few days later, Buhari urged the lawmakers to reconsider their stance on the proposed securitisation of the CBN loans, indicating that interrogation of the composition of the loans could be done after granting approval.
On January 17, the special committee set up by the Senate to liaise with the executive for necessary information on the debt said the attempts made to meet the CBN governor and the finance minister for the required details proved abortive. It asked for additional three days “for thorough work on the assignment and submission of the report.”
But the plan was not approved before the lawmakers went on recess on January 25, ahead of the general election. With the polls now over, the race for the leadership of the 10th National Assembly is hotting up amid heightened political tension in the country. The outcome of the presidential election is still a bone of contention, with major opposition parties challenging the emergence of Bola Tinubu as President-elect in court.
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Bismarck Rewane, managing director of Financial Derivatives Company Limited (FDC), rules out the possibility of securitising the debt before the end of Buhari’s tenure.
“It’s not feasible. It is a bit tight. There is a process for making an issue. First of all, there is no approval yet. Secondly, the debt management office will have to announce an issue – the programme – and investors will have to put their money into it. The programme will have to be rated. Bonds are normally rated,” he told BusinessDay by phone.
He said the current National Assembly could approve the plan. “But even if they approve it now, what is the time between now and the issue? And why would investors buy, because basically it is not new money? It is money that is moving from one chamber to another.”
He said the Buhari administration should do what can be done effectively, hand over properly and let the new team take over from there.
CBN loans jump more than 30-fold under Buhari
The debt owed to the central bank ballooned to N23.77 trillion as of October 2022, more than 30 times what Buhari met in 2015. It was N789.67 billion when President Goodluck Jonathan left office.
The CBN overdraft is not included in the country’s public debt stock, which rose to N46.25 trillion last year from N39.56 trillion in 2021, according to the Debt Management Office. The N46.25 trillion comprises the debts of the Federal Government, the 36 state governments, and the Federal Capital Territory.
The law allows the central bank to lend to the federal government through Ways and Means Advances, a loan facility used to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.
Credit: Business Day
