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In a recent development, the Senate has granted approval and confirmation for the securitization of the outstanding 7.3 trillion naira Ways and Means, a move advocated by President Bola Tinubu.
The Ways and Means provision, as explained, allows the government to secure short-term or emergency finances from the Central Bank, specifically for funding delayed government cash receipts in times of fiscal deficits.
President Tinubu, in his communication to the Senate, highlighted that securitizing Ways and Means would result in a reduction of debt service costs. Notably, the interest rate for these securitized advances stands at 9% per annum, representing a decrease compared to the Monetary Policy Rate (MPR), which includes an additional 3%.
It’s crucial to note that this request does not entail new borrowing but rather seeks to extend the repayment period of existing loans. The terms outlined by the Debt Management Office (DMO) specify the issuance of debt securities by the Federal Government to the Central Bank, with a 40-year tenor, a 5% interest rate, and a 3-year moratorium on principal repayments.