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The Federal Government of Nigeria is owing to the Central Bank of Nigeria a whopping sum of about N10 trillion circa $25 billion. This is according to the Director-General of the Debt Management Office, Patience Oniha.

She mentioned this at an ongoing Zoom meeting with investors and analysts. According to her, the debt will be converted into bonds by the CBN perhaps ending one of the longest borrowing sprees on record from the CBN Ways and Means.

Details from the session indicate the following;

  • Total Ways and Means of about N10 trillion will be formalized
  • It will be converted into bonds and paid back over the next 30 years
  • There will be a moratorium of principal for the first two years
  • The bonds will not be sold in the open market but to select investors

In the debrief session held via Zoom, Ms. Oniha explained that the government’s borrowing via Ways and Means could no longer be sustained leading to the decision to convert the loans into bonds.

This move seeks to not just formalize the CBN’s lending to the government but also make it somewhat legal for the government’s past and perhaps future borrowing. Minister of Finance Dr. Zainab Ahmed first revealed in January that there are plans between her ministry and the central bank (CBN) to convert loans from the apex bank into tradeable securities.

Ways and Means

The central bank has since 2015 backstopped the government’s non-debt-funded revenue shortfalls arising from its budgets. In 2020, the government borrowed about N2.9 trillion from the CBN via Ways and Means to fund a budget deficit of about N6.1 trillion. At a N10 trillion balance, Patience Oniha’s comment suggests that the CBN has been funding Ways and Means since 2015.

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Minister for Finance, Zainab Ahmed also touched on the murky nature of the Ways and Means loan,.

“On CBN financing, we will not normally make a line provisioning for the financing. So we have domestic borrowing in the budget and that covers whatever remit of financing required to fund the national budget. We are working with the CBN to regularise the previous borrowing that have been made to turn them into formal borrowing and by the Nigerian economy and to this extent, the CBN and I (fiscal authorities) need to agree on the rates and the tenures and the cost of the borrowing, so we would be formally doing that in early 2021 on the previous borrowing that has been made, and also projected borrowings in 2021. So we will design special instruments that limits what is done in terms of domestic borrowing from the CBN.”

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Nigeria has recorded a total budget deficit of about N24.8 trillion in the last 10 years, according to data collated from the Federal Budget Office and analysed by Nairalytics. The deficits are funded via new loans while the balance is funded by borrowings from the central bank which is termed Ways and Means.

According to provisions of the CBN act, Ways and Means borrowing is not expected to exceed 5% of prior year revenues. Based on the N2.8 trillion borrowed last year, the CBN has lent the government 52.8% of its current year revenues or 62.2% of 2019 revenues of N4.5 trillion, thus a breach of the act.

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Lower oil prices over the last 6 years have decimated government revenues affecting its ability to fund capital and recurrent expenditure. With public debt has also doubled to N32 trillion from about N12.6 trillion in 2015, the government has little option but to look to the central bank for a lifeline.

Dr. Yemi Kale, Statistician-General of the Federation/CEO Nigerian National Bureau of Statistics has disclosed that Nigeria would rebase its GDP later this year.

Dr. Kale disclosed this at the media conference on the significance of the on-going National Survey of Establishment (NSE) on Thursday in Abuja.

He revealed that after the GDP is rebased, the NSE would include information on 17 economic activities which would have more data on the present economic realities in the country.

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“It would also provide useful information for policymakers on the activities driving the Nigerian economy and those that require government intervention and serve as a benchmark for subsequent commercial and industrial sector statistics.

“In the wake of the COVID-19 pandemic when many businesses and commercial activities have been impacted severely, a survey such as this, with the information to emanate, is extremely invaluable to designing and planning for the post-COVID-19 long term growth and development of the private sector in Nigeria,” Kale said.

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Kale added that another major factor for the re-basing is the National Agriculture Sample Census, to be held later this year, citing that the NBS  enumerated over 1.4 million business establishments in the National Business Sample Census (NBSC) 2020/21 which commenced in October 2020.

“The first component is the listing or enumeration of business and commercial establishments across the country, while the second part is the sample survey, which is currently going on.

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“The data retrieved from the businesses during the listing exercise were the establishment’s contact details, nature of the business and ownership structure, number of employees, and GPS location.

“The sample survey which commenced with the training of field personnel two weeks ago, essentially, takes a sample of the enumerated business establishments under the listing exercise,” he added.

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What you should know

  • The last time Nigeria rebased its GDP was in 2014 which made the economy surpass South Africa’s as the largest in Africa. Dr. Yemi Kale said the economy expanded to an estimated N80 trillion ($488 billion) for 2013.
  • Meanwhile, Nigeria’s Gross Domestic Product (GDP) in real terms declined by -3.62% (year-on-year) in Q3 2020, thereby marking a full-blown recession and second consecutive contraction from -6.10% recorded in the previous quarter (Q2 2020).

The Federal Government is currently working on the second phase of the Strategic Revenue Growth Initiative (SRGI 2.0) as well as driving towards achieving a target revenue to GDP of 15% by 2023.

This was disclosed by the Minister of Finance, Dr. Mrs. Zainab Shamsuna Ahmed during her presentation at the virtual event of the Nigerian Economic Outlook 2021 hosted by Deloitte Nigeria.

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The Strategic Revenue Growth Initiative (SRGI) was launched last year by the federal government for identifying and exploiting sources that would largely boost and diversify the revenue base of the country.

According to Dr. Ahmed, the second phase of the initiative (SRGI 2.0) has become imperative having reviewed strategies, identified challenges and as well as re-assessed the prospects and opportunities in pursuing the objectives.

In her own words,

  • “SRGI 2.0 involves a top-down approach that is driven by enhanced data and technology to complement a bottom-up approach aimed at improving operational efficiencies.
  • “We are willing and available to partner with all states governments yet to join on this transformative journey.”

The Honorable Minister of Finance outlined 3 key thematic areas covered by the SRGI as achieving sustainability in revenue generation, identifying new and enhancing the enforcement of existing revenue streams, as well as achieving cohesion in the revenue ecosystem (people and tools).

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What you should know

  • Through this strategic initiative, the government intends to build and strengthen sustainable revenue generation systems through the application of the right incentives, safeguards and performance management systems.
  • There are several initiatives under the SRGI with the revenue generation and enhancement potential, which are to be closely monitored using data-driven performance management to achieve the results and set targets.
  • FG is favourably disposed to partnering with interested states ministries of Finance and states revenue generating agencies in achieving the set target revenue to GDP of 15% by 2023.

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