Finance Minister Wale Edun has announced the federal government’s strategic departure from the contentious practice of borrowing from the Central Bank of Nigeria (CBN) to cover budget shortfalls.
Addressing reporters during the signing of the 2024 budget in Abuja, Edun emphasized the Tinubu-led administration’s commitment to reforming government borrowing practices.
President Bola Tinubu’s early tenure witnessed bold economic reforms, including dismissing former CBN governor Godwin Emefiele, who was responsible for the widely criticized “ways and means advances.”
The practice involved printing money to bridge revenue gaps, significantly inflating the country’s debt burden.
Edun underscored the shift from relying on central bank funding, highlighting the move towards market-based financing to meet fiscal requirements.
The World Bank’s critique of central bank financing cited Nigeria’s soaring inflation, reaching an 18-year high of 28.2% in November.
The practice of funding deficits through the central bank skyrocketed during former President Muhammadu Buhari’s tenure, elevating the nation’s borrowing costs to over 90% of revenues last year.
To curb the trend, lawmakers agreed to convert substantial central bank loans into a 40-year bond at a 9% interest rate.
Recent approvals further converted additional trillions of naira from the central bank overdraft into extended-term bonds, elevating Nigeria’s public debt close to 100 trillion naira.
Edun expressed confidence in strategies to enhance government revenue and reduce reliance on borrowing.
The 28.8 trillion naira budget signed by Tinubu anticipates a deficit of 9.8 trillion naira, mainly funded through borrowing from local debt markets and multi-lateral lenders.
Challenges in international capital markets, exacerbated by the COVID-19 pandemic and escalating global interest rates, have made borrowing on these platforms significantly expensive. Nigeria’s 2051 bond commenced the year with a yield of 10.27%.
Despite these hurdles, Edun remained optimistic, assuring adequate and timely funding for the budget.
“We are very optimistic that not only will this budget be funded adequately, but it will be funded on a timely basis as well,” Edun said.
