By Asmau Ahmad
The World Bank says interest payments on the federal government’s borrowing from the Central Bank of Nigeria (CBN) will gulp over 62 percent of revenue by 2027.
The international financial organisation made the projection in the latest edition of its Nigeria development update (NDU) titled, ‘Nigeria’s choice.’
The federal government has been borrowing from the CBN through ways and means advances, a loan facility through which the CBN finances the government’s budget shortfalls.
In the report, World Bank said interest payments will increase by 2.4 percentage points of the gross domestic products (GDP) between 2018 and 2027.
“Despite the restructuring of ways and means stock in 2023, interest payments are projected to steadily increase by 2.4 percentage points of GDP between 2018 and 2027, and by 2027 interest payments will account for over 62 percent of revenues,” the report reads in part.
“Consequently, the burden of expenditure consolidation efforts is expected to be borne heavily by capital expenditures, which are projected to stay limited at 3.3 percent of GDP, well below what is needed to close Nigeria’s large infrastructure gap.
“Over the medium term, the fiscal deficit is expected to remain in breach of the legal limit set in the fiscal responsibility act (2007), and the debt stock is expected to increase.
“Debt is expected to remain under the sustainability threshold of 70 percent on the key solvency risk measure of the debt-to-GDP ratio, reaching about 45 percent of GDP in 2027.”
The Nigeria’s federal government borrowed N6.31 trillion from the CBN through ways and means advances in 10 months (January-October 2022).
The ways and means’ debt climbed from N17.5 trillion in December 2021 to N23.7 trillion in October 2022 — an increase of N6.3 trillion within 10 months.
These borrowings are currently not included in the country’s total public debt stock (federal and state governments) which currently stands at N44.06 trillion.
Last week, Buhari had written to the senate, seeking approval for the restructuring of N23.7 trillion ways and means loans given to the federal government by the CBN.
“The ways and means advances by the Central Bank of Nigeria to the federal government has been a funding option to the federal government to cater for short term or emergency finance to fund delayed government expected cash receipt of physical deficit,” Buhari had said.
But, the senate, had on Wednesday, suspended the president’s request.
The lawmakers demanded that before the upper legislative chamber could approve the request, the senate must have the details of what the funds were spent on.
