Ways and Means strictly a CBN affair – experts
A financial expert, Prof. Uche Uwaleke, says the Ways and Means Advances of the Central Bank of Nigeria (CBN) to the Federal Government is strictly within the purview of the apex bank.
Uwaleke, a Professor of Capital Market at the Nasarawa State University, Keffi said this in an interview on Saturday in Abuja.
He spoke against the backdrop of effort to securitise the pending N22.7 trillion Ways and Means Advances, approval of the process by Senate and the role of the Debt Management Office (DMO).
According to Uwaleke, the DMO had no role because the Ways and Means were completely under the control of the CBN.
He said that the DMO could only have played advisory role when necessary.
“The much the DMO could have done would have been to include the CBN overdraft to the FG as part of the country’s domestic debt stock.
“This will enable the DMO issue early warning signals whenever the Ways and Means limit as stimulated in the CBN Act was being breached,” he said.
The Ways and Means provision allows the federal government to borrow from the CBN if it needs short-term or emergency finances.
This is to enable the government to fund expected cash receipts of fiscal deficits.
The Nigerian Senate had, on Wednesday, approved the request of President Muhammadu Buhari to restructure the advances through securitisation.
Based on statutory provisions, however, the approval of the Senate and the House of Representatives are required for securitisation.
Implementation can, thus, only be upon concurrent approval of the House of Representatives.
Uwaleke, however, explained that securitisation of the N22.7 trillion Ways and Means Advances would afford the Federal Government a ‘breather’ in terms of debt service burden.
According to him, this is in view of the fact that repayment of the N22.7 trillion will now be spread over 40 years with a three year grace period on the principal sum.
“In respect of the securitisation of the Ways and Means, the government debt restructuring arrangement affords it a breather in terms of debt service burden.
“Similarly, the cost of annual debt service will reduce given the concessional rate of nine per cent as against the current 20.5 per cent interest rate charged on CBN’s Ways and Means.
“The cumulative effect of these would be a reduction in government budget deficit and freeing up resources that could be applied to more productive areas,” he said.
According to him, since the securities will only be taken up by the CBN and not the public, the fear that it will crowd out the private sector is no longer there.
“There is equally the issue of debt transparency that it engenders.
“Before now, CBN’s Ways and Means did not form part of the public debt stock reported by the Debt Management Office.
“Securitisation would entail including it as part of the country’s public debt which makes for transparency ” he said.
He said that, henceforth, adequate safeguards should be put in place to ensure that CBN’s Ways and Means were curtailed due to its negative impact on the general price level.
“The relevant provisions of the CBN Act should clearly stipulate the conditions under which debt limits can be breached.
“The process should involve approval by the National Assembly as well as stiff sanctions for breach of the limits provided in the Act without following due process,” he said.
According to Okechukwu Unegbu, a past president of the Chattered Institute of Bankers of Nigeria (CIBN), the Ways and Means Advances constitutes money that has already been appropriated by the Federal Government.
“It is important to note that the Federal Government does not need the DMO to obtain such facilities from the CBN.
“It does so directly, and sometimes, it entails the printing of money.
“The DMO will only be required to record it as debt after it is securitised, ” he said.
The CBN is legally authorised to issue Ways and Means Advances to the Federal Government according to Section 38 of the CBN Act, 2007.
The N22.7 trillion Ways and Means Advances, therefore, do not represent new borrowings, but overdrafts by the CBN to the Federal Government.
The advances is statutorily managed by the Ministry of Finance and the Office of the Accountant-General in the Consolidated Revenue Fund where it is domiciled.
########@#####
Reps $700m Cabotage fund suspension will affect disbursement conditions – Shipowners
The Nigerian Shipowners Association (NISA), founding President, Mr Isaac Jolapamo, says the suspension of the Cabotage Vessel Financing Fund (CVFF) will affect the progress in the fund’s disbursement conditions.
Jolapamo disclosed this on Saturday in Lagos.
He said members of the association had done enough to meet the conditions stipulated for the disbursement of the fund.
The House of Representatives had ordered the immediate suspension of the planned disbursement of $700 million CVFF to shipowners by the Nigerian Maritime Administration and Safety Agency (NIMASA).
They also directed the agency to present an audited statement of account showing all monies that have accrued to the CVFF within seven days.
Jolapamo who expressed disappointment prayed the CVFF to see the light of day.
“We, as an association have gone further to have a company, although we had it since 2008. But we floated a new one just to meet the condition.
“Members of the association own the company. If we are 16 or 20, are we not good enough to get the fund?
“We have started making moves to approach the Nigerian National Petroleum Company Ltd because we understand that it is offering to give nine per cent of the 15 per cent the shipowners need to contribute.
“So that gives us six per cent, so if all of us as broke as we are, we are able to see six per cent to add. So why should anybody want to come and spoil what is going on,” he said.
Jolapamo said it was not the right of the House of Representatives to suspend the CVFF, wondering the reason for the vested interest of legislators on the fund.
“We have been on this struggle for 20 years, to disburse the money that we have contributed. It is not government money. They have made laws, why must they disturb the executive.
“After the law, the bus stops on the minister’s table for the disbursement. There are people who want to do it and have their name written in gold, somebody just woke up and say they are stopping it.
“The legal advisory we have is that they don’t have the right to do what they are doing, except there is a vested interest. This matter has gone so far that what is left is the disbursement.
“Some of us that were just fifty something years old when this thing started are now in the seventies and eighties. To me, we have to see to its end,” he said.
On the issue of the 8.5 per cent charged by commercial banks for the CVFF disbursement, Jolapamo said that the 8.5 per cent was the high end of single digit that shipowners were asking for.
He said that they were asking for interest rate in the region of five or 7.5 per cent.
“In other climes, they are getting 2.5 per cent and of course, if we have between five to 7.5 per cent which is in the third quarter of ten, it will be better,” he said.
