Victor Opatola, a legal practitioner focused on issues surrounding the Federal Government’s borrowing practices, recently discussed the complex topic of “ways and means” in an interview. This term refers to provisions within the Central Bank of Nigeria (CBN) Act that allow the CBN to give temporary financial assistance to the government in times of budgetary shortfalls, akin to an overdraft from a commercial bank. However, this process lacks oversight from the National Assembly under current laws, leading to criticisms regarding transparency and accountability. Over the years, successive Nigerian administrations have repeatedly resorted to ways and means borrowing without adherence to necessary regulations, thereby enabling significant builds-up of debt that has persisted from one administration to another.
The term “securitisation” has become increasingly relevant in the context of Nigeria’s ways and means borrowing, which involves converting these loans into a bond that is then incorporated into Nigeria’s national debt. This maneuver acts as a way for the Federal Government to eliminate its immediate obligations to the CBN on paper while shifting that burden to the public debt, collected from taxpayers over a more extended timeframe. The supposedly cleared debt thus continues to exist but is simply categorized differently; rather than being a direct obligation of the government, it becomes a shared responsibility of the nation, potentially misleading citizens into believing that the government is managing its debts effectively.
In recent statements, President Bola Tinubu has claimed that his administration has cleared a significant N30 trillion in ways and means loans. Opatola criticizes this assertion, framing it as a deceptive narrative that masks the reality of the public debt still hanging over the nation. By reclassifying the debt instead of actually repaying it, the administration creates an illusion of fiscal responsibility that may persuade the public to accept ongoing borrowing without questioning its sustainability or effectiveness. This rhetoric seems to overlook the fact that burdening the entire nation with debt, rather than resolving it, poses significant implications for Nigeria’s financial stability.
The consequences of employing ways and means as a funding source have far-reaching impacts on Nigeria’s economic landscape, especially concerning inflation and currency stability. Opatola points to the previous administration’s heavy reliance on this method of funding, highlighting that the CBN does not operate from its reserves; thus, excessive borrowing results in the increased printing of money. Such actions have contributed directly to rising inflation rates, as the influx of unutilized money into the economy does not generate productive growth, leading to trends of devaluation and destabilized purchasing power for citizens.
Opatola’s observations extend to the role of the National Assembly in facilitating the country’s burgeoning debt crisis. He notes that the Assembly has often acted as a mere rubber stamp, approving government requests for loans without rigorous examination or accountability. This lack of scrutiny has fostered an environment where debt grows at an alarming rate, with limited productive use of the funds being allocated. As the legislature fails to fulfill its duty of oversight, it allows for the continuation of these practices under various administrations without demanding transparency or strategic planning for repayments, compounding the financial risks faced by the nation.
In contemplating the long-term sustainability of Nigeria’s debt burden, Opatola expresses grave concern about the implications for future tax burdens on citizens. As debts accumulate, there could come a point where the government may resort to taxing individuals to cover these obligations, thereby straining the populace’s financial capacity. He warns that such patterns observed in other countries undergoing debt crises could lead Nigeria toward a precipice of economic collapse if corrective measures are not taken soon. The ongoing dependence on loans, the nature of the agreements made, and ineffective fiscal management all raise red flags about the nation’s fiscal health, urging the need for immediate reforms to ensure responsible governance and financial stability.
