Tinubu assured that the interest rate on securitised Ways and Means advances has been trimmed to 9% per annum, compared to +3% on the MPR.
The Senate has approved the securitisation of the outstanding 7.388trn Ways and Means following President Bola Tinubu’s request.
The President said the move is aimed at realising the reduction of the debt service costs and extending the repayment period of the existing loans.
This was disclosed in a letter read by the President of the Senate, Sen. Godswill Akpabio during a special plenary on Saturday.
The parameters of the securitisation as gazetted by the Debt Management Office (DMO) entail the Federal Government issuing debt securities with a 40-year tenor to the Central Bank of Nigeria (CBN), with a 5% interest rate and a 3-year moratorium on principal repayments.
According to the President’s letter to the Senate, the interest rate for the securitised advances has been reduced to 9% per annum, compared to the MPR of +3%.
The president in his letter said “Although the federal government is considering various measures to forestall the use of ways and means advances for domestic debt servicing, it has however become highly imperative to securitise the outstanding ways and means advance to the federal government before the end of 2023.”
Tinubu clarified that his request is in accordance with Section 38 of the CBN Act 2017, which offers interim loans to the federal government to cover budget deficits.
He also noted that according to CBN data, the consolidated revenue fund was at N7.3 trillion as of December 11, 2023, owing mostly to domestic debt payments, principal and interest.
Part of the letter also read, “The savings arising from the much lowered interest rate will help reduce the deficit in the budget. Improvement in debt transparency and securitize Ways and Means Advances are included in the public debt Statistics.”
“In view of the foregoing, the Senate is invited to consider and approve securitisation of the outstanding debit balance of N7.3 trillion in the CNRF as at December 11 2023.”
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