President Bola Tinubu has submitted a proposal seeking Senate approval for the securitisation of the balance of Ways and Means revenue in Nigeria’s Consolidated Revenue Fund (CRF), citing concerns about outstanding debt due to domestic debt servicing. Addressing Senate President Godswill Akpabio, Tinubu underscored the necessity of addressing the debt burden through this strategy.
“In line with Section 38 of the CBN Act 2007, the Central Bank may grant temporary advances to the Federal Government for temporary deficiencies in budget revenue, not exceeding five percent of the previous year’s government revenue,” Tinubu explained in his letter read at the plenary session in Abuja.
Highlighting the urgency, Tinubu emphasised the imperative need to securitise the outstanding Ways and Means advances before the year’s end, outlining perceived benefits. He stated, “Securitisation will lead to lower interest rates at nine percent compared to the previous three percent, reducing debt service costs and enhancing debt transparency in public debt statistics.”
An analysis of the development reveals the violation of provisions within the CBN Act due to the Federal Government’s extensive borrowing, exceeding the stipulated limit of 5% of the previous year’s revenue. The cumulative figure stands at N23.7 trillion, far exceeding the statutory threshold and breaching fiscal responsibility.
While the securitisation proposal aims to restructure debt and alleviate fiscal pressure, dissenting voices among experts had in the past highlighted legal and economic concerns. They argue against the legality and appropriateness of a securitisation plan, citing potential macroeconomic distortions and heightened inflation risks.
The Ways and Means provision in the CBN Act allows short-term government borrowing for fiscal deficits. Notably, the Senate recently approved an upward revision of the Ways and Means loan, extending access for the Federal Government from 5% to 15%, amidst ongoing discussions and concerns about fiscal prudence and adherence to legal frameworks.