Apart from N41tn Public Debt, FG Owes CBN $47bn, Report Reveals

*Bill Gates-backed think-tank seeks $50bn for Africa’s loan scheme

Emmanuel Addeh in Abuja

The federal government has confirmed that the Central Bank of Nigeria (CBN) is being owed N20 trillion ($47 billion), which is yet to be added to the country’s outstanding public debt, according to a report by the Budget Office of the Federation.
This is coming as a think-tank backed by the Bill & Melinda Gates Foundation is seeking $50 billion in aid to help debt-ridden African countries re-enter capital markets and avoid future defaults.

The debt figure was as of March 31, the Budget Office said, in a document, which gave the details of the country’s expenditure plans from 2023-2025.
The document was posted on the Budget Office’s website at the weekend.
Nigeria’s outstanding public debt is N41.6 trillion.

Even with the additional obligations, the country remains “within Nigeria’s self-imposed” limit of 40 per cent debt to Gross Domestic Product (GDP), according to the report quoted by Bloomberg.
The government plans to securitise its Ways and Means Advances (WMAs) from the CBN and revamp “it into a longer tenor amortising facility with a lower interest rate,” according to the Budget Office.

The country barely earned enough revenues to cover debt service payments in 2021, according to the budget office while in the first four months to April, government income of N1.63 trillion was less than the N1.94 trillion needed to cover debt-service payments, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed said, according to a presentation on the budget office’s website.

While the debt portfolio remains vulnerable to revenue and export shocks, “the challenges are being addressed by the government through its ongoing strategic revenue growth initiatives,” the report added.
Meanwhile, a think-tank backed by the Bill & Melinda Gates Foundation is seeking $50 billion in aid to help debt-ridden African countries re-enter capital markets and avoid future defaults.

The amount is an “average estimate,” said the President of the Paris-based Finance for Development Lab, which was launched last month,  Daniel Cohen.
Cohen, who is also President of the Paris School of Economics, said the money would be used to “enhance” credit quality by providing guarantees and helping African commodity exporters and importers hedge against price volatility.

Some African countries, which hit capital markets as global interest rates plunged to a record low, are on the verge of default due to the economic impact of the COVID-19 pandemic and Russia’s invasion of Ukraine, Bloomberg reported.
Sovereign dollar bonds from African countries trade on average at 1,007 basis points above the US Treasury yield, meeting the widely accepted definition of a debt crisis.

The laboratory, which develops the proposals and wants an established body to hold the facility, includes representatives from the Steering Committee of the United Nations Economic Committee for Africa and think tanks from Santiago and Accra to New Delhi. World Trade Organisation (WTO) Director-General Ngozi Okonjo-Iwela attended its launch, the report said.

The Gates Foundation provided $2.6 million in September 2021 to start the project, the Bloomberg report recalled.
“Last year, we interacted with passionate thinkers from the Paris School of Economics who brought new ideas and energy to the funding debate – from Francophone Africa to the Paris Club to the private sector,” the foundation said in a response to questions.

“We jointly thought of a new organisation with the vision of creating an engaged community of think tanks and research centres that could help provide innovative, yet practical and evidence-based proposals meeting today’s financial challenges,” it added.
Cohen said he had begun talking to politicians, including French leaders, about contributions to the fund, noting that the contribution could come in the form of International Monetary Fund (IMF) special drawing rights.

The lab is proposing rolling interest-payment guarantees and loan-restructuring and facilitation facilities to provide cash “sweet” to creditors to cut the length and cost of restructuring negotiations, a document said.

Cohen said such a mechanism is necessary to help countries re-enter the market.
“Either they are locked out of the market or they can re-enter, provided they are enhanced by some sort of guarantee. Such a mechanism would be needed to restore access to the market. There will be a lot of restructuring in the coming years. Some cash can be a big advantage,” Cohen stressed.
The alternative is that countries locked out of capital markets will have to rely on grants and multilateral development banks for their financial needs, he explained.

The lab is also offering protection against commodity volatility by guaranteeing margin call payments triggered by rising prices, explaining that the laboratories also plan to develop relationships with Chinese academics as many African countries are indebted to China.
“We are thinking of a parallel group of Chinese scholars thinking about the role of China’s main creditor in Africa,” he said.

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