Claim
President Bola Ahmed Tinubu claimed his administration has cleared the ways and means of debt of over N30trn.
Verdict
This claim by Nigeria’s leader is FALSE. Ways and Means debt was added in the official debt stock of Nigeria as bonds.
In June 2024, Nigeria’s Debt Management Office said that the securitization of N4.90 trillion as part of the securitization of the N7.3 trillion Ways and Means Advances approved by the National Assembly in December 2023, was also responsible for the N24.33 trillion increase in the debt stock.
Full Text
President Bola Tinubu, while addressing the nation to commemorate the country’s 64th Independence Day, claimed his administration has cleared over N30 trillion in ways and means advances.
Ways and Means is a loan facility through which the Central Bank of Nigeria (CBN) provides short-term financing to cover the federal government’s budget shortfalls.
Verification
In May 2023, the Ahmed Lawan-led senate approved the sum of N22.7 trillion that was spent by the executive arm of government without the initial approval of the national assembly.
The upper legislative chamber approved the request after Ibrahim Gobir, senate leader, presented a report.
Gobir said some of the beneficiaries of the funds are the office of the accountant-general of the federation, the ministry of foreign affairs (ECOWAS national unit), Nigeria Bulk Electricity Trading, Azura Power West Africa, Niger Delta Power Holding Company, and Accugas Limited.
The N22.7 trillion is money borrowed by the federal government from the Central Bank of Nigeria (CBN) through the “ways and means advances”
In December 2023, the national assembly approved President Bola Tinubu’s request for the securitization of outstanding N7.3 trillion ways and meant debt balance.
Securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans, or credit card debt obligations (or other non-debt assets that generate receivables) and selling their related cash flows to third-party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs.
In a simple understanding, this is the process of pooling together various types of debt instruments and selling them as bonds to investors.
How FGN Bonds Works
FGN Bonds are debt securities (liabilities) of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the Federal Government. The FGN has an obligation to pay the bondholder the principal and agreed interest as and when due.
When you buy FGN Bonds, you are lending to the FGN for a specified period of time.
The FGN Bonds are considered as the safest of all investments in domestic debt market because it is backed by the ‘full faith and credit’ of the Federal Government, and as such it is classified as a risk free debt instrument. They have no default risk, meaning that it is certain your interest and principal will be paid as and when due. The interest income earned from the securities are tax exempt.
Ways And Means Loan Added To Nigeria’s Debt Stock
In June 2024, the Debt Management Office, DMO, explained that the securitization of N4.90 trillion Ways and Means loan and differences in foreign exchange rates are responsible for the increase of Nigeria’s total debt stock by N24 trillion to N121.67 trillion at the end of March 2024.
DMO boss, Patience Oniha said that the securitization of N4.90 trillion as part of the securitization of the N7.3 trillion Ways and Means Advances approved by the National Assembly in December 2023, was also responsible for the N24.33 trillion increase in the debt stock.
The total public debt as of March 31, showed that the total public debt in Naira terms stood at N121.67 trillion compared to N97.34 trillion as of December 31, 2023.
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Conclusion
Contrary to President Tinubu’s claim, Ways and Means debt was pooled together and added to Nigeria’s debt.The Ways And Means is included in the official debt stock of Nigeria as bonds His administration hasn’t cleared it.
