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 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, overall budget deficit is projected to be N5.60
trillion representing 3.93 per cent 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 have 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.
Revised bond issuance calendar for the fourth quarter 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 per cent.
DMO plans to raise some N450 billion in first quarter 2021,
according to the three-month bond issuance calendar. Despite disruptions and
economic headwinds, the DMO has maintained its regular monthly debt issuance programme
under its twin-mandate of market development and government funding.
Market analysts yesterday said the securitisation 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 have 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 the early 2021 on the previous borrowing that has been made, and
also projected borrowings in 2021.
“So, we will design 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 securitise the total outstanding
overdraft based on the 2020 level of bond allotment, if the government decides
not to issue additional bonds.