Nigeria: DMO Says Securitisation of CBN’s N22.7trn Advances to FG Will Improve Transparency

The Debt Management Office (DMO) says the securitisation of CBN’s N22.7 trillion “Ways and Means Advances’’ to the Federal Government will improve debt transparency.

“Ways and Means Advances’’ allows the Federal Government to borrow short-term or emergency loans from the CBN to cushion expected cash receipts shortfalls. The Senate on Wednesday (May 3, 2023) approved a request by President Muhammadu Buhari to restructure advances already collected through securitisation.

Implementation of the restructuring request by the CBN would need concurrent approval by the House of Representatives, however. The Federal Government promised to repay already collected short-term loans with securities like treasury bills and the issuance of bonds.

It would issue the securities to the CBN and not to the public. DMO’s Director-General, Mrs Patience Oniha, explained in Abuja on Friday that securitisation would allow the inclusion of the “Ways and Means Advances’’ in public debt statistics.

“It will reduce the debt service cost as the new interest rate is 9 per cent per annum while the Monetary Policy Rate of the CBN is 21 per cent per annum.

“The large savings arising from the much lower interest rate will help to reduce budget deficits and expectedly, the level of new borrowings,’’ she explained.

She stated also that provision for interest in the securitised “Ways and Means Advances’’ starting from 2023, and the principal payment, starting from four years ahead, would be made in the Federal Government annual budgets. She explained that the securitisation did not involve new loans.

“The CBN had already provided the funds to the Federal Government.

“Based on statutory provisions, the approval of the Senate and the House of Representatives are required for securitisation.

“Implementation will be upon receipt of the approval of the House of Representatives,’’ Oniha stressed.

After securitisation, the “Ways and Means Advances’’ will run for a tenor of 40 years with three years moratorium for the principal only and repayment amortisation of more than 37 years.