The Nigerian Senate has approved the securitisation of N7.3 trillion ways and means in the Consolidated Revenue Fund sought by President Bola Tinubu.
The Senate approved the request on Saturday, December 30, the same day the President sent a letter to the Chamber.
In the letter to the Senate, Tinubu stated that the securitisation of ways and means would lead to the realisation of reduction of debt service cost, putting the interest rate for the securitised ways and means advances lowered at nine per cent per annum.
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The ICIR reports that the ways and means provision allows the Federal government to borrow from the Central Bank of Nigeria (CBN) if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.
Calling the attention of the Senate to the provisions of section 38 of the Central Bank of Nigeria (CBN) Act 2007, he noted that the law stipulates that the apex bank may grant temporary advances to the Federal Government.
Tinubu stated that regarding the temporary deficiency of budget revenue provided, such overdrafts do not surpass five per cent of government revenue from the previous year.
“The Senate is invited to note that from available information by the CBN, the Consolidated Revenue Fund (CRF) account of the Federal Government of Nigeria (FGN) stood at N7.3 trillion as of December 2023, that is due to domestic debt servicing, principal and interest.
“While the Federal Government is considering various measures to forestall the use of ways and means advances for domestic debt servicing,” he stated.
The President also stated that it has become highly imperative to securitise the outstanding ways and means of advancement of the federal government before the end of the year.
He said the securitisation of the ways and means would lead to the realisation of some benefits, which include “reduction of debt service costs as the interest rate for the securitise ways and means is lowered at nine per cent compared to three per cent previously adopted.
“The savings arising from the much lower interest rate will help to reduce the deficit in the budget and improvement in debt transparency as securitised ways and means advances are included in the public debts statistics.”
In May, the Senate approved the securitisation of N22.7 trillion loans the CBN extended to the federal government under its ways and means provision.