The Nigerian Senate has revealed that the Federal Government used part of the controversial 22.7 trillion Naira ($49 billion) ways and means advances – a loan facility from the Central Bank of Nigeria(CBN) – to finance its obligations under an Indemnity Agreement with the World Bank, for power and gas projects involving Nigeria Bulk Electricity Trading (NBET), Azura Power West Africa, Niger Delta Power Holding Company, and Accugas Limited.
This was disclosed on Wednesday before the Red Chambers by the Senate’s ad hoc committee commissioned to probe how President Muhammadu Buhari’s administration spent the loan obtained from the Central Bank of Nigeria (CBN) through ways and means advances, after the disclosure, the Red Chamber finally approved the request of the Government to convert the loan to bonds.
Abdullahi Ibrahim Gobir, Senate Majority Leader, Chairman of the adhoc committee, during the plenary revealed that Nigeria Bulk Electricity Trading(NBET), Azura Power West Africa, Niger Delta Power Holding Company, and Accugas Limited were some of the beneficiaries of the funds.
After receiving the report of the Special Committee probing the spending of Ways and Means, the Senate approved the recommendations and later converted the 22.7 trillion Naira ($49 billion) loans from the CBN into bonds that will be repaid over several decades.
Senator Gobir earlier in his presentation said that part of the money was released to fund emergency capital projects and offered as loans to state governments.
He said, “The fiscal document was initially N19.3trillion (N19.326,745,239,660.20) as of June 30, 2022, but later increased to N22.7tn (N22,719,704,774,306.90 ) as at December 19, 2022, as a result of financial obligations in respect of the capital projects including the power and gas projects, as well as the expenditure on domestic debt service gaps and interest rate.
“The Senate on Wednesday, December 28, 2022, approved the sum of N819,536,937,813 from the N1tn additional request made by the president leaving an outstanding balance of N180.4bn being the accrued interest on the sum.
The House Leader also revealed that the House of Representatives had earlier approved the additional N1tn Ways and Means Advances requested by the President to enable the smooth implementation of the supplementary budget.
He said, “Part of the Ways and Means monies were given to State Governments as loans to augment budgetary shortfall in their various States.“Most of the requests for funds for an increase in Ways and Means were made to Mr. President on the need to finance the budget due to revenue shortfall.
“Such requests were either made by the Hon. Minister of Finance, Budget, and National Planning or the Central Bank Governor.
He further hinted that the Federal Government had in an attempt to rescue the economy from collapse, borrowed repeatedly from the CBN, exceeding the 5 percent threshold of the prior year’s revenue as stipulated by the CBN Act, 2007, due to the serious shortfall in Government Revenue.
The Senate Committee in its report recommended that “If there is a need to exceed the five percent threshold of the prior year’s revenue, recourse must be made to the National Assembly for approval.
Following the approval of the fiscal document by the Senate, EnergyDay gathered that the Ways and Means Advances would therefore be securitised as bonds to investors. enabling the Debt Management Officer to include the debt in the public debt stock.
That development, therefore, means that Nigeria’s actual public debt stock of N44 trillion has been increased to about N77 trillion. It has pushed the country’s debt-to-gross domestic product(GDP) ratio near the 40% limit.
HOW BUHARI USED WAYS & MEANS ADVANCES TO FINANCE POWER, GAS PROJECTS
EnergyDay’s check showed that the Federal Government has been using the “ways and means advances” to finance the commercial transaction involving the Nigerian Bulk Electricity Trading, NBET, and the Niger Delta Holding Company NDPHC, with the backing of the World Bank.
President Buhari accented the guaranteed instruments — the Indemnity Agreement, the Support Agreement, and the PCOA Agreements — that activated the Azura Power deal in 2015, with the liability of $1.2 billion incorporated, pays $30 million a month under the “take or pay” deal.
Recall that the failure to service the Agreement will cost the country a fine of $1.2 billion if the government decides to exit from the agreement.
Note that the various agreements were signed with Azura-Edo Independent Power Project Ltd and Azura Power West Africa all managed by the NDPHC, during the administration of former President Goodluck Jonathan to facilitate the construction of the 461mw plant in Edo state.
Further check by EnergyDay also showed that part of the Ways and Means facility was also used by President Buhari’s administration to finance the World Bank Partial Risk Guarantee (PRG) in support of the long-term Natural Gas Sales Agreement for the supply of 131 million cubic feet per day (MMcfpd) gas by Accugas Limited to the 561MW Calabar Nigeria Integrated Power Project in September 2017, under the Nigeria Electricity and Gas Improvement Project (NEGIP).
The settlement of the obligations by the Government, has been described as injurious to the interest of Nigeria, failure of which is likely put the country’s foreign assets at risk, due to nature of the sovereign guarantee.
EnergyDay gathered that there have been several attempts by the Government to exit the deals but some of the get-out clauses would be costing the country about $1.2 billion.