Recession fears as NASS approves N23.7trn extra-budgetary spend for Buhari

NIGERIA is feared to be technically headed to recession as both the Senate and the Federal House of Representatives sanctioned an approval of N23.7 trillion lent through ways and means (unregulated borrowing) by the Central Bank of Nigeria (CBN) to the Federal government.

The ways-and-means provision allows the government to borrow from the apex bank if it needs short-term or emergency finance to fund delayed government cash receipts of fiscal deficits.

The Federal government has promised to repay the debt, which stood at N23.7 trillion in December 2022, with securities like treasury bills and bonds issuance.


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But the government failed in its repayment assurance and economic watchers fear the wider implications of rising inflation and possible recession.

Senate Leader, Ibrahim Gobir, who spoke on the Senate approval on May 3, listed beneficiaries of the loan to include the Office of the Accountant-General of the Federation, Ministry of Foreign Affairs, Nigeria Bulk Electricity Trading, Azura Power West Africa, Niger Delta Power Holding Company, and Acugas Limited.

Knowledgeable economic watchers said this approval without a detailed breakdown of what the money was spent on had the capability to push Nigeria into recession.

To the Lead Director, Centre for Social Justice (CSJ), Eze Onyekpere, the National Assembly flouted its oversight function as mandated by the Act establishing it by not insisting on the details of what the approved funds were spent on.

“If the National Assembly members had insisted on the breakdown, and had done a cost-benefit analysis of the approval, they would have discovered probably that some of the funds were misappropriated. They flouted the law that empowered them for oversight,” Onyekpere said.

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The National Assembly is mandated by the Constitution to act as an agent of accountability through its oversight mechanisms.

A development economist, Kelvin Emmanuel told The ICIR that the Federal government must repay the loan, albeit at a lower interest, and by implication, every Nigerian would be repaying it “since the Federal government is everyone in Nigeria, because it is their taxes and royalties.”

Emmanuel said, “Nine per cent on a 40-year Government bond means the bond yield curve is inverting, a sign that the country might be heading to a technical recession.

“When this is gazetted, the total debt stock rises to N69.04 trillion, and takes debt-to-gross domestic product (GDP) ratio to -34.5 per cent and debt service-to-budget ratio to -39 per cent.

The chief executive of CFG Advisory,  Adetilewa Adebajo, advised the Federal government to adopt options within the Debt Management Office (DMO) Act to refinance N23.7 trillion of Nigeria’s total debts, instead of securitising it.

Adebajo proposed a resolution trust, a special purpose vehicle (SPV) backed by legislation within the current DMO Act and framework, for refinancing of the nation’s burgeoning debts, as against securitising the ways and means debt financing on the CBN balance sheet.




     

     

    He suggested that the Federal government should, as a matter of urgency, stop financing the country’s debts through ways and means, which he described as “illegal.”

    The World Bank had in its latest report on Macro Poverty Outlook for Nigeria released in April 2023 said the country spent 96.3 per cent of its 2022 revenue on servicing its debts.

    The report noted that Nigeria’s fiscal position deteriorated in 2022, leaving the cost of petrol subsidy to increase from 0.7 per cent to 2.3 per cent of the GDP.

    “This has kept the public debt stock at over 38 per cent of GDP and pushed the debt service to revenue ratio from 83.2 per cent in 2021 to 96.3 per cent in 2022,” it read.

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    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

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