Ways and Means: Obi raises concerns over FG’s N7.3trn borrowing, calls for transparency

Peter Obi, the presidential candidate of the Labour Party (LP) in the last election, has raised concerns over the recently approved N7.3 trillion Ways and Means debt balance.

Ways and Means is a loan facility through which the Central Bank of Nigeria (CBN) provides short-term financing to cover the government’s budget shortfalls; while securitisation is the practice of pooling together various types of debt instruments and selling them as bonds to investors.

On December 30, 2023, President Bola Tinubu, in a letter addressed to both chambers of the national assembly, requested for the securitisation of the outstanding N7.3 trillion ways and means debt balance.

Tinubu had argued that the securitisation would lead to the realisation of some benefits, such as a reduction of debt service costs.

On the same day, the national assembly approved the request.

Commenting on the unrestrained government borrowing in a thread on X on Tuesday, Obi described the securisation as “illegal”.

Obi said ex-President Muhammadu Buhari’s administration also got the senate to approve a N22.7 trillion ways and means borrowing from the CBN, barely 26 days to the end of the eight-year tenure.

“In seven years, CBN lending to the Buhari government had climbed 2700% in flagrant violation of the CBN Act,” the former Anambra governor said.

“Indifferent to the illegality of the excessive ways and means borrowing, the national assembly still approved the new Tinubu administration’s request for an N7.3 trn securitization of the existing ways and means facility just before considering the 2024 budget proposals.

“No questions asked. No explanations were sought as to the precise purpose of these borrowings all within the seven-month tenure of this government.

“Ordinarily, minimum public accountability should require that the president and his administration offer more specific explanations about the purpose of these borrowings.

“But so far, all we have been told is that these borrowings are meant to fund ‘capital’ expenditure.”

According to Obi, the continuous securitisation of CBN loans is against the law and against the CBN Act which limits the federal government’s borrowing from the regulator to 5 percent of the previous year’s revenue.

He added that the law also requires the liquidation of the outstanding borrowing before any new advancement can be made.

“More importantly, the CBN Act expressly states that all borrowings under the Ways and Means cannot be converted to debt or securitized if the CBN is the underwriter,” he said.

Obi said the securitisation of “illegal borrowings” from the CBN and transferring the same into Nigeria’s debt stock portends danger to the future of the economy and increases the debt burden of the nation.

“It is even more worrisome because these accumulations of debts are not being transparently and productively utilised or accounted for,” the politician said.

“While this new debt of N7.3 trillion has been hurriedly approved without scrutiny by the national assembly, the immediate public accountability question is: can the federal government, which holds the trust of the people, tell us what they used N7.3 trillion to do?

“We have always been told that all borrowings are for ‘capital’ projects, can we know the capital or productive projects this huge borrowing is being applied to?”

‘LAVISH SPENDING WILL WRECK ECONOMY’

The ex-Anambra governor also decried the lack of transparency in the borrowings.

He described the government’s actions as an emergence of a “disturbing pattern of huge borrowing and profligate spending on nonessential procurements which are being termed ‘capital’ expenditure and are being funded with an accumulation of debts”.

“For instance, a good number of these so-called ‘capital’ expenditure items as contained in the 2024 budget are more procurement and luxury projects,” Obi said.

“This trend of lavish spending backed only by equally lavish borrowing is unsustainable and would wreck the economy in due course. It needs to be halted.

“Unless this trend is halted, the nation runs the greater risk of running into more turbulent economic waters in the near future.”

Obi, therefore, said it was high time the country went beyond politics and partisan grandstanding to addressing the fundamental issues of rational economic management.

He added that rather than the current administration paying sufficient attention to issues of rational economic management, there is an unsustainable level of debt being piled upon the economy.

This, he said, is further burdening the already distressed populace who are bearing the burden of “harsh economic policies not backed by compassionate cushioning policies”.