FG creates “Special instruments” as part of plans to formalize borrowing from CBN

The ministry of finance and the Central bank of Nigeria have planned to convert loans from the financial regulator into tradeable securities, the Minister of Finance Zainab Ahmed has said.

During the question and answer session following the recent public presentation of the 2021 approved budget – breakdown and highlights the Minister of Finance and DG Budget Office, the minister made the plan known.

She responded to a question about any plans to tap into CBN financing for the 2021 budget as no provision was made last year, yet about N2.8 trillion was borrowed as exclusively reported by Nairametrics.

According to Ahmed, the government is working with the central bank to regularize the loans and will turn them into formal borrowings, suggesting that the over N2.8 trillion in Ways and Means extended loans could be repackaged and sold as bonds.

“On CBN financing, we will not normally make a line provisioning for the financing. So we have domestic borrowing in the budget and that covers whatever remit of financing required to fund the national budget.”

She then went on to confirm that talks are ongoing with the central bank to turn their loans into formal borrowings and that there is a need between her ministry and the central bank to agree on the rates and the tenures and the cost of borrowing, all of which will be decided in 2021.

“We are working with the CBN to regularise the previous borrowing that has been made to turn them into formal borrowing and by the Nigerian economy and to this extent, the CBN and I (fiscal authorities) need to agree on the rates and the tenures and the cost of the borrowing, so we would be formally doing that in early 2021 on the previous borrowing that has been made, and also projected borrowings in 2021. So we will design special instruments that limits what is done in terms of domestic borrowing from the CBN.”

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