A recent report from the Budget Office of the Federation (BOF) has revealed that the Federal Government of Nigeria’s interest payment on Ways and Means debt to the Central Bank of Nigeria (CBN) in the first half of 2023 exceeded the revenue generated from crude oil. The Ways and Means payment of N1.68 trillion surpassed crude oil revenues of N813.58 billion by 107 percent.
Key Points:
- Ways and Means Payment Exceeds Oil Revenue:
- The CBN Ways and Means payment of N1.68 trillion surpassed the FG’s crude oil revenues of N813.58 billion in the first half of 2023, highlighting a significant imbalance.
- Impact on Debt Service:
- The surge in Ways and Means payments led to a worsening of the Federal Government’s debt service situation. The Ways and Means payment increased by N966 billion, exceeding the budgeted amount and contributing to a total debt service of N3.94 trillion.
- Other Debt Service Components:
- Foreign loan servicing decreased by 49 percent, while domestic debt service charges dropped by 11.1 percent. These reductions offset the increase in Ways and Means payments to some extent.
- Violation of CBN Act:
- The Ways and Means borrowing, though controversial, has played a significant role in the government’s financial strategies. However, it has been criticized for potentially violating Section 38(2) of the CBN Act.
Conclusion: The report underscores the significant impact of the Ways and Means payment on Nigeria’s fiscal landscape. The reliance on this financial instrument has led to a substantial interest burden on the government, raising discussions on its sustainability. The findings have prompted concerns about the country’s fiscal stability and the need for a balanced approach to managing debt.
|BD