Tinubu created false impression, N30tn ways and means uncleared – Lawyer
A legal practitioner, Victor Opatola, who represented some Nigerians seeking to restrain the Federal Government from securitising the sum of N22.7tn Ways and Means loan at a Federal High Court earlier this year, speaks to ISMAEEL UTHMAN on President Tinubu’s claim that his administration has cleared N30tn CBN loan
How will you explain the concept of “ways and means” in simple terms for the average Nigerian to understand?
Ways and means is a provision under Section 38 of the Central Bank of Nigeria Act. The law allows the CBN to grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at an interest. It is an advance – money loaned to the Federal Government by the CBN. However, this particular loan must be repaid to the CBN within the fiscal year it is borrowed. It is like an overdraft that you take from the bank and pay back immediately when your account is funded.
What makes ways and means unique is that it has no oversight regulation from the National Assembly. The National Assembly does not regulate it, and that allows the Federal Government to request a loan from the CBN without approval. This has been one of the criticisms against ways and means. The National Assembly and the citizens might not know when the money was received and for what purpose it was obtained. It is always shrouded in secrecy.
Normally, ways and means should be five per cent of the government’s revenue within the preceding year. But over the years, successive governments have been borrowing from the CBN without repaying the money within that fiscal year. Under former President Muhammadu Buhari, the government borrowed trillions of naira from the CBN, and the loan kept accumulating from President Jonathan’s administration till the present government. When the Federal Government couldn’t pay back this money, it came up with a plan to securitise the loan. That was when we went to court to stop the move, but the court ruled against us.
What does securitise mean?
Ways and means is a debt of the Federal Government to be paid to the CBN. There is a difference between the debt of the Federal Government and the debt of Nigeria. Nigeria’s debt is a public debt, whereas the Federal Government’s debt is private, to be paid by it alone. You cannot include Nigeria’s debt when you are highlighting or calculating the Federal Government’s debt.
Securitisation means converting the accumulated ways and means loan (the Federal Government debt) to a bond (which is not made public) and adding it to Nigeria’s debt, which can be paid over a long time. Securitisation means transferring the Federal Government’s debt to public debt, or Nigeria’s debt. If Nigeria’s debt is N500m, immediately after the securitisation of ways and means, it will increase because the Federal Government’s debt has been added. The Federal Government will then appear on paper as not owing the CBN anymore, and that gives it a clean sheet to start borrowing again as if it has not violated ways and means before.
Before securitisation, the Federal Government had been violating ways and means. It had been borrowing beyond the required percentage, and it didn’t pay back within the stipulated time, which led to accumulation. But now that it has retired and transferred the debt to the public, the Federal Government is no longer owing the CBN on paper, but the debt is now on Nigeria and Nigerians. The debt has not been paid; it has only been transferred to Nigeria.
Given your explanation, how do you react to President Bola Tinubu’s declaration that his administration has cleared N30tn ways and means?
What President Tinubu’s administration has done is simply securitise the loan, shifting the burden from the Federal Government to Nigeria. Instead of being solely responsible for repaying the loan, the entire country will be responsible for the repayment through securitisation.
The statement that the ways and means debt has been cleared, as declared by the President, is a technical use of words to create the impression that a debt existed and has been paid off, whereas the debt still exists. The N30tn will still need to be paid later by the country. It is just a ploy to mislead Nigerians into believing that the government is doing more than it actually is. The President is merely creating a false impression.
To what extent do you think the use of ways and means financing influences Nigeria’s inflation and exchange rate stability?
Under Buhari’s administration, ways and means was a major source of finance. However, the CBN does not have its own money, so it couldn’t have provided trillions of naira from its reserves. The implication is that more money was printed. Basic economics teaches us that when too much money is printed and injected into circulation, it can lead to inflation. The money printed under Buhari’s regime, through ways and means, is partly responsible for the inflation we are experiencing in the country now. There was a lot of money in circulation, but it was not used productively.
What is your perspective on the actions and inactions of the National Assembly regarding Nigeria’s growing domestic and foreign debt?
If you look at the ease with which loans are obtained and the manner in which ways and means are acquired and spent under various governments, you will realise that the National Assembly has often acted like a rubber stamp. The National Assembly’s failure to scrutinise the government’s use of ways and means shows that it is a willing partner in the growing debt crisis.
The legislature has not done enough to curb the country’s rising debt. When the President wants to borrow money, all he needs to do is ask the National Assembly, and without any serious scrutiny, they approve it. This has not been helpful. Our debt profile keeps growing, and there is very little productive use of these loans. As long as the National Assembly is well-funded, they seem to have no problem with whatever the President presents. They have consistently acted as a rubber stamp for the executive and are failing in their duty to scrutinise and check the executive’s actions.
Do you consider Nigeria’s current debt burden sustainable in the long run, and what risks does this pose to the country?
If we are not cautious with the way we take loans and keep piling up our debts, it will get to a point where individuals will be taxed for loan repayment, with each bank account taxed a particular amount to pay off the debt. It will reach a stage where we will be at serious risk of default. We should learn from various countries that are defaulting on their debt services, and they have to undergo restructuring or face stringent conditions. The way we obtain loans is worrying. The terms and conditions of the loans are burdensome. All these factors are dangerous, and we are approaching a precipice.
can use the police or military to intimidate individuals, investors will come willingly.
