Nigeria’s debts may rise above N60 trillion by the end of the first quarter following a move by the Federal Government to convert its N11.91 trillion indebtedness to the Central Bank of Nigeria (CBN) to formal securitized loans.
Last year, the Federal Government obtained N2.86 billion through the “ways and means” of the CBN to partly finance the 2020 budget deficit of N6.15 trillion.
With the outstanding balance of N9.04 trillion in 2019, the 2020 borrowings pushed the government’s outstanding balance to the apex bank to N11.91 trillion.
Total debts may climb higher as deficit financing for the 2021 budget kicks in. In 2021, the overall budget deficit is projected to be N5.60 trillion representing 3.93 percent of the Gross Domestic Product (GDP). The budget deficit is to be financed mainly by borrowings including Domestic sources, N2.34 trillion; Foreign sources, N2.34 trillion; Multi-lateral/Bi-lateral loan drawdowns, N709.69 billion and Privatisation Proceeds, N205.15 billion.
Speaking at the 2021 budget breakdown session, Finance, Budget, and National Planning Minister Mrs. Zainab Ahmed, said the government was working with the CBN to regularise the previous borrowing that has been made by turning them into formal borrowing by the local economy.
Official reports by the Debt Management Office (DMO), which oversees Nigeria’s debt issuances and management, showed that Nigeria’s total debts stood at N47.8 trillion by the third quarter ended September 30, 2020.
These consisted of external debts of N31.98 trillion and domestic debts of N15.846 trillion.
The revised bond issuance calendar for the fourth quarter of 2020 showed about N160 billion. The DMO offered a total of N60 billion at the FGN Bond Auction in December 2020. The offer was oversubscribed as total bids received were N134.056 billion, a subscription level of over 220 percent.
DMO plans to raise some N450 billion in the first-quarter of 2021, according to the three-month bond issuance calendar. Despite disruptions and economic headwinds, the DMO has maintained its regular monthly debt issuance program under its twin-mandate of market development and government funding.
Market analysts yesterday said the securitization of the CBN’s overdrafts would give a fairly true position of government’s indebtedness.
Mrs. Ahmed said the CBN and the Ministry of Finance will work out the rates and the tenures and the cost of the borrowing within the next few weeks.
She said: “We are working with the CBN to regularise the previous borrowing that has been made to turn them into formal borrowing by the Nigerian economy and to this extent, the CBN and I 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 a special instrument that limits what is done in terms of domestic borrowing from the CBN,” Ahmed said.
Analysts at Cordros Group said while the securitization of the “ways and means” loans would help to unburden the CBN and clean its balance sheet, it may take up to six years to fully securitize the total outstanding overdraft based on the 2020 level of bond allotment if the government decides not to issue additional bonds.