Federal Government to Securitise over N20trn Taken from CBN
President Muhaammadu Buhari

Federal Government to Securitise over N20trn Taken from CBN

The Nigerian government has agreed to securitise more than N20 trillion in tranches of overdraft advances collected from the Central Bank, the nation’s lender of last resort. The apex bank had in breach of its own act extended overdraft to the government to support its wobbling fiscal position amidst rising debt profile.

The refund will be issued in the form of Treasury Bills and Bonds to be issued for subscription, according to the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed.

Broadstreet analysts consider the overdraft as backdoor funding following persistent fiscal slippage which has remained unaddressed. The amount when securities will raise total public debt upward to above N62 trillion, thus worsening both debt to gross domestic product and debt service cost to revenue.

Ahmed, who spoke yesterday during the 2023 budget breakdown in Abuja, said President Muhammadu Buhari has approved the securitisation of CBN’s N20 trillion overdraft. Consequently, the Federal Government can issue securities like Treasury bills, Bonds Certificates and other security instruments to repay what it owes the apex bank.

Amidst macroeconomic uncertainties, the Debt Management Office was unable to raise N225 billion in Bonds reopening on Monday as investors only subscribed N107 billion, a situation worsened by low appetitive for naira assets and weak liquidity conditions in the financial system.

At the presentation, the finance minister also put the value of the Federal Government’s assets under the management of the Ministry of Finance Incorporated (MoFI) at N30 trillion.

This is the first time the amount the CBN has loaned to the Federal Government has been given public affirmation. Ahmed, while responding to questions from reporters, said: “The total Ways and Means is N20trillion and President Muhammadu Buhari has given approval to securities.

“The securitisation will be over a 40-year period with an interest rate of nine per cent…Over the years, we have been paying the interest component at the current rate that is charged on the Ways and Means”, Ahmed said. READ: DMO Raised N1.6trn Amid Plan to Securitise FGN Ways & Means Loan from CBN

She explained that Federal Government has budgeted N1.2 trillion to offset some Ways and Means taken from the apex bank in breach of the CBN Act 2007 in 2023.

MarketForces Africa reports that analysts predicted that yield on the fixed income market will rise ahead of securitisation of the government ways and means advances from the CBN, which is estimated at about N21 trillion as of the end of August 2022.

#Federal Government to Securitise over N20trn Taken from CBN

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