The Chief Executive Officer, CFG Advisory, Mr. Tilewa Adebajo has cautioned the federal government against borrowing from the Central Bank of Nigeria (CBN).
Following the proposed steps, which the federal government wants to take in refinancing the N23.7 trillion of the nation’s total debt, he proposed a resolution trust special purpose vehicle (SPV) backed by legislation within the Debt Management Office (DMO) act and framework as against securitising ways and means.
Speaking yesterday as a guest on the Morning Show of ARISE NEWS Channel, the broadcast arm of THISDAY Newspapers, Adebajo also said the approval of the N1trillion to finance the budget deficit for the year by the House of Representatives was illegal.
According to him, “The government has to continue, we cannot shut down government, we need to pay the civil servants and continue to fund government activities because government is a continuum.
“If you say securitization is illegal, what solutions are you offering? I cannot work on this alone, Debt Management Office has to be involved, Ministry of Finance has to be involved and the Central Bank of Nigeria has to be involved as well because it is culpable as its the balance sheet that has been used for this.”
He however urged the public to look at alternatives regarding securitisation.
“I have provided some alternatives for the legislators to consider, and we have been getting a lot of feedback, I have also been consulting widely on this.
“N21 billion is a lot of money. The DMO is able to raise just about N360 billion every month, so in a year the best they can do is N4.5 trillion as that’s the capacity they have right now.
“So this year they will raise at best N5 trillion in the market, but we have N21trillion refinance, so the capital market does not have the capacity to absorb these funds and that is where the problem is,” he noted.
Speaking on the new plan and how it intends to refinance, Adebajo said it was important to know what the size of the debt was, before isolating it into a SPV.
According to him, the SPV holds the debt over a period of 5-7 years, and then, it should start getting released into the market.
He explained that the SPV had to be very clear with a specific sunset clause so that in about 8-10 years, it will be completely wound down.
“Some enhancements can be added to the instruments which will make it more attractive to investors and release it into the market over a period of time,” Adebajo added.
He further stated that since the laws in the country have been broken, he expects the relevant authorities to take care of whoever violated the CBN Act.
Adebajo noted that the CBN has overreached itself a bit with the current fiscal crises the economy is in.
He added that it was important for CBN to take itself out of the menace as it contributed to it by violating the CBN Act and letting the N21.7 trillion get to this level. He advised the apex bank to audit the intervention loans it has and push them out to the Bank of Industry, Bank of Agriculture and Development Bank of Nigeria.