Wednesday brief: Buhari printed money to pay creditors. Now the government can’t pay back.
+ Unlike Nigeria, Ghana introduces China restrictions
Good morning.
We are delving into a sensitive topic on government finances and Ghana has decided to impose restrictions on travellers from China amid an apparent Covid surge.
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Buhari printed money to pay creditors. Now the government can’t pay back.
President Muhammadu Buhari on Tuesday signed the 2023 budget into law.
At the signing ceremony in Abuja, the president said it will cost the federal government N1.8 trillion in interest if the national assembly fails to approve his request to convert a central bank loan worth N23.7 trillion into long term bonds.
Last week, we covered how the Senate suspended voting on the request.
Senators Betty Apiafi and Thompson Sekibo argued that the request was not constitutional, and voting on the conversion request was put on hold.
The federal government borrowed, without national assembly oversight, the N23.7 trillion from the central bank, through ways and means advances, in this case an euphemism for money printing.
Usually, ways and means advances are used for short-term or emergency financing, but the Buhari administration proposed to convert its excess use of the facility to 40-year bonds at 9% interest.
According to the president on Tuesday, the government currently pays a 3% margin above the central bank's lending rate of 16.5% .
He urged the national assembly “to reconsider its position” on his loan-bond swap proposal, arguing that the money had been used to “meet obligations to lenders, as well as cover budgetary shortfalls in projected revenues and/or borrowings.”
My take: I’m not sure why there’s not more outrage over this request. The federal government has argued that it had no choice but to borrow in the face of tough economic realities - recessions, Covid, Russia-Ukraine war - but it’s an untenable position because there is no obvious reduction in government spending. The problem with borrowing is that, one way or another, someone has to pay for it. In this case, the average Nigerian is paying dearly through skyrocketing inflation. The national assembly will most likely accept the proposal, but this is another example of how the Buhari administration has frittered away national resources in exchange for a delayed judgment day.
What else is happening?
China’s Covid surge: Unlike Nigeria, Ghana said it will begin to require a negative Covid test result from travellers arriving from China.
Tough pill: Some teachers in Benue state have not been paid for up to 13 months. A government representative blamed Covid and dwindling federal allocations.
Voter apathy: At least 6.7 million Nigerians are yet to collect their permanent voter cards less than eight weeks to the general elections, according to Punch Newspaper.
Peter Obi: Endorsements have continued to roll in for the Labour party presidential candidate. Elder statesman, Edwin Clark is the latest to back the former Anambra state governor.
Bola Ahmed Tinubu: The APC candidate met with north-west leaders in Kano and promised to be fair and just if elected president in February.
G5 Governors: Bayelsa governor Douye Diri said the PDP is still hoping its five aggrieved governors will support the party’s presidential candidate, Atiku Abubakar.
Government magic: More than 17 days after it was released, many Nigerians are yet to receive the new naira notes. The old notes, which are expected to expire on January 31, are still being dispensed from ATMs.
And that’s it for today. See you tomorrow.