The Debt Management Office (DMO) has revealed that repayments of principal to service the loans from the Central Bank of Nigeria (CBN) through the Ways and Means Advances will begin in about four years.
The DMO made this disclosure while providing clarifications on the Securitisation of the ₦22.7tn Ways and Means Advances.
In a Frequently Asked Questions statement by the DMO, it was revealed that the loan approved by the National Assembly would be for a tenor of 40 years with an interest rate of nine per cent per annum.
It was also clarified that there would be a moratorium on payment of principal for about three years.
The DMO pointed out that ‘The Securities will be issued to the Central Bank of Nigeria by the Federal Government of Nigeria.
‘The Securities will not be issued to the public by the FGN to raise funds.’
The debt office also listed some benefits of securitization, saying that it would lead to debt transparency and reduce the debt service cost.
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It said, ‘It will reduce the Debt Service Cost as the new Interest Rate is 9% p.a. compared to the Monetary Policy Rate plus three per cent which translates to 21.0 per cent p.a. (MPR – 18.0 per cent + 3 per cent) currently being charged on the Ways and Means Advances.
‘The large savings arising from the much lower Interest Rate will help reduce the deficit in the Budget and expectedly, the level of New Borrowings.’
On the repayment, it noted that the Federal Government will begin repayment of interest this year while that of principal will begin in four years.
The debt office said, ‘Provisions for Interest on the securitized Ways and Means Advances (starting from 2023) and principal repayments starting from year four, will be made in the Annual FGN Budgets.’
The DMO also noted that the securitization of the Ways and Means Advances does not involve new money being given to the Federal Government as the CBN had already provided the funds to the government.
It added that based on statutory provisions, the approval of the Senate and the House of Representatives are required for the securitization, noting that the implementation will be upon receipt of the approval of the House of Representatives.
Africa Today News, New York had earlier reported that both the Senate and the House of Representatives have approved the request of the President, Major General Muhammadu Buhari (retd) to restructure the N22.7tn Ways and Means Advances.