Budget 2022: ‘Na Our Great Grandchildren Go Pay Buhari’s Debt’ (1)
By Bello Zaki
As I stepped out of my house in the morning of Thursday December 2022, Benji, my next door neighbour, holding his small transistor radio as usual, confronted me with a sullen face and without greeting threw a poser on me: “President Buhari had sent a letter to the National Assembly seeking for approval to borrow and spend N819 billion for the remaining ten days of 2022.”
“Oga Benji, This Buhari debt is getting out of hand wooh! Ah, how Nigerians go pay this mounting debt nah?” I also threw in my surprise and a requested for his explanation.
“My brother, na our great grandchildren go pay Buhari debt” Benji concluded tersely.
“How?” I quickly asked.
Benji went on to explain:
On Wednesday December 21, 2022 President Buhari had sent a letter to the National Assembly (NASS) seeking for approval to borrow and spend N819.5 billion as a supplementary budget to attend to devastation caused by floods on farmlands and road infrastructure few months back. If approved, this request will raise the budget deficit for 2022 to N8.17 trillion and deficit to GDP ratio to N4.43%. Senate President, Ahmed Lawal assured the president that the Senate would approve his request the following day.
On the same day, President Buhari had also sent another request to NASS for approval to restructure N23.7 trillion Ways and Means advances given to the Federal Government (FG) by the Central Bank of Nigeria (CBN). This is another loan from the CBN that is not reflected in the above mentioned deficit.
In his letter for approval of the Ways and Means facility, President Buhari had acknowledged the mounting balance of the FG’s Ways and Means account with the CBN, and had instructed the CBN to convert (securitise) it into a long term loan instrument to be auctioned to both domestic and foreign creditors, for future generations of Nigerians to pay, he said: “The ways and means, balances as of December 19, 2022 is N22.7 trillion. I have approved the securitisation of the ways and means balances along the following terms Amount: N23.7 trillion; Tenure: 40 years, Moratorium on principal repayment, three years, pricing interest rate 9 percent. Your concurrence and approval is sought to allow for the implementation of same”. Dear reader, may you live up to the next forty years and beyond to witness Nigerians paying this debt, and the catalogue of many other debts that were accumulated by this administration.
The Federal Government had been borrowing to finance the 2022 budget deficit for the last ten months, as it did in the budgets of the previous years, totaling N6.3 trillion, thus: From the available record of the CBN, FG borrowed N704.3 billion from the CBN in January 2022; N226.3 billion in February; N507.7 billion in March; N112.3 billion in April; N569.6 billion in May; N335.8 billion in June; N695.2 billion in July; N1.46 trillion in August; N749.4 billion in September; and N957.2 billion in October. All these debts are not reflected in the N42.84 trillion (U.S$103.31billion) country’s total public debt stock, owed by federal and state governments: This is the highest rate, frequency and total any administration had ever borrowed in the history of Nigeria.
Besides, the borrowing had contravened the provision of Section 38 of the CBN Act of 2007, that says the total amount of Ways and Means Advances outstanding shall not at any time exceed 5% of the previous year’s actual revenue of the federal government: Buhari’s administration borrowing had since exceeded the 5% threshold of the previous year’s revenue.
Another contravention of the CBN Act by this administration is the failure to settle its 2021 outstanding Ways and Means account balance with the CBN amounting to N17.5 trillion as at the end of December 2021, as the Act stipulates that: “All advances shall be repaid as soon as possible and shall, in any event, be repayable by the end of the federal government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.”
The immediate negative effect of persistent exploiting the Ways and Means facility in the CBN is the galloping inflation and the very fast depreciation of the Naira Nigerians have been experiencing in the Buhari era, as the CBN itself noted on its website thus: “The direct consequence of Central banks’ financing of deficits are distortions or surges in the monetary base, leading to adverse effects on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy.”
Federal Government’s External Loans, 2015 to 2022
The administration of president Buhari tripled the total external debt it inherited from President Goodluck Jonathan within three years, that is between 2015 to 2018, and as of today it has nearly doubled the level it had ever reached in the history of this country – the US$28 billion threshold of pre-Obasanjo era.
This is the trajectory of Nigeria’s foreign debt portfolio:
1. President Olusegun Obasanjo inherited U.S$28 billion from the military in 1999, and reduced it through payment and forgiveness by Paris and London clubs to U.S$2.11 billion by 2007 when he left office;
2. There was no foreign loan in President Yar’Adua’s administration, but Acting President Goodluck Jonathan secured U.S$1.39 billion while President Yar’Adua was hospitalised in Saudi Arabia;
3. President Jonathan also secured U.S$3.8 billion during his administration, bringing the country’s outstanding foreign loan to U.S$7.3billion, which President Buhari inherited from him mid-2015;
4. President Buhari inherited U.S$7. 3billion from President Jonathan in 2015. President Buhari borrowed U.S500 in 2016, bringing the total to U.S$7.84 billion, and by the end of 2018 the total external debt rose to U.S$21.4, tripling the amounting he inherited in 2015; the debt rose to U.S$23.1billion in 2019; U.S$30.3billion in 2020; U.S38.3bilion in 2021, and 43.0 in 2022.
Therefore, Nigeria’s total debt overhang (internal and external) is a now today about U.S$150 billion, and more than 70% of it had accrued to this administration in the last seven and half years.
“So, Oga Benji, wetin dem take dis moni do?” I asked him.
“Abeg, I don’t know. Asked them.” He answered with annoyance.
I shall ask them, and the answer will be on this blog in my next outing, Insha Allah.
Culled from Bello Zaki’s blog
