 Welcome back. Just last week the Senate approved the president's request to securitize their 22.7 trillion now ways and means advances provided to the federal government by the CBN protein and enter prolonged discussions that began last year. Now in recent years the FG's fiscal operations have resulted in significant fiscal deficits due to on the performance in revenue, particularly in oil revenue compared to budgeted outcomes. Also resulted has increasingly relied on ways and means financing from the CBN to cover the unfunded portion of fiscal deficit. However this has led to the WNN balance consistently surpassing the 5% threshold of the federal government's prior years revenue chip elated in the CBN Act. I'm not being joined by International Finance and Economics Analyst Mukhtar, Mohammed Mehmed. Thanks for joining us on the business and side in plus TV Mukhtar. Thank you my pleasure. Okay let us start this way. First of all the ways and means advances of the Central Bank of Nigeria to the federal government should it not be a CBN strictly CBN affair under its purview. What's the role of the DMO in all of this? Well it's supposed to be between the CBN and the federal government. But again when you are talking about depth the DMO has to come in because it's the depth that the federal government has to be. The DMO is like the regulator of the the custodian of Nigerian debt so they have the one that plans payment schedule. So that's why they definitely have to be involved in it. So okay fine the DMO says the securitization will involve the issuance of debt securities with a 40-year tenure by the federal government to the Central Bank of Nigeria. I want you to break it down for us because over time analysts say that the federal government seems to abuse their ways and means. They just break down this new development to us. Well you said you have abused it. In the first place the I'm not supposed to go above that limit of about 30% of the budget deficit when we were above it and the CBN was supposed to bring them if they were going to pull above that and said that because of the independence of the CBN said no we cannot give you thus far because you have brought above your limit. The only time you have to go above your limit is in the time situation maybe there's a crisis security crisis. But at this time by the border the court was not in a stance that it was not in one situation. So definitely the border above their limit and the CBN could not act on its autonomy to say no we cannot give you and that's where we have the problem that we keep saying that especially the current CBN has become a tool in the hands of the government. Now the government can know about the revenue. You know we're saying that the problem with Nigeria is not in the GDP is in the revenue. You can have a very low GDP. You can have a very high GDP to borrow more and a low revenue you cannot borrow because it's not the GDP that pays the money it's the revenue that pays the money. Now it had to do that is because it just realized that the government has no money and it's a domestic debt. So what we are seeing is more like a debt reshuffling and saying okay now we are going to be paying CBN 9% of his debt every year is now stands like a security and so they are expecting Nigerians to buy into this product and the Nigerians will begin to benefit from it. I mean from the bond when they invest in that they get 9% and the government will be the CBN will be able to have and the government will be able to have money to pay the CBN. It's using one in legality to co-correct on that because the ways and the means are supposed to go to the national assembly who never had that and now again even if you are going to proceed to bond you still need the approval of the national assembly but as it is now it's it's a policy that the government decided to go on with without getting the revenue approval. All right Mokta but some analysts have pointed out that the executive at the national assembly may have acted prematurely as section 38 of the CBN Act prohibits securitization of the ways and means. Don't you think that consequently we might need an amendment to the act to proceed with this so-called securitization? I think we all need an amendment in any law because the whole idea of a law is no hundred percent and people will always find ways and ways to legitimately beat the law and I think that is what they have succeeded in doing. They didn't just they look at the lapses in the law and they took advantage of it. I keep saying the problem is not in the area of it's not in the area of legislation it's even in the legislatures the legislation we already have we don't seem to do that so definitely don't have how much you try to do the legislation there will always be people find means to beat it. Okay fine let's get more insights now securitizing the ways and means advances and adding them to the public debt balance will raise the total public debt to about 69 trillion Naira or about the 35 from percent of the 2022 GDP from 46.3 trillion Naira or 23 percent you know that we had before you know what's the implication of this adding this ways and means to our general public debts really? What's the implication of it is that you are not owing more debts so we have more debt to pay and that's the implication in we did an analysis on some of the foreign debts Nigeria is owing and we realize that every Nigeria is owing the our debt of 50 dollars so we need to add this to and we need to combat it to Naira and know how much we are owing in terms of Naira every Nigeria is owing and before Naira it was 200 Naira each Nigeria is owing in terms of Naira debts so I think it's not just looking for ways to pay but how you go about looking for these ways to pay I mean there's any administration that have taken advantage of debts with impunity this current administration they've not looked at debt as a they've not looked at debt as something that is going to affect the future generation of the incoming administration they looked it at one side we need that we need to finish projects that we started and most of these projects are physical projects that most of them will not be concluded by them and most of them are economical value if they are given into the private sector to supply the PPP most of these private sector that build and operate for the next 25 years the government would have had a challenge those from maybe to socially investment in health and education but the government that refused to think out of the box and that is why we have the challenge that we have now so for me I think this government that don't think out of the easy way out of the easy way out is to borrow money okay another factor supporting the need for a review of debt benchmarks in the fiscal strategy paper is that the share of domestic debt in the overall public debt split will rise to almost 73 percent compared with around 60 percent previously is this really true yeah it is and again most of this 72 percent government is the highest debt top I mean in any developed economy you see companies are going that are highly in debt because the college is there to expand their business and through their business they're able to service this debt or what we have seen here in Nigeria that the government led the debt to pay salary and also to continue to pay salary so definitely the debt profile keep going up and the means of payment gets slimmer by the day because the only other means they look at okay outside of the put wire which have succeeded regime and they could the NPC denotes given into the federation account so the next thing they're looking is widely it has the tax bracket and when they talk about whether the tax brackets taxing the already tax so definitely I think he calls for signing calls for worry the debt in the set is not bad it is being used for productive ventures but when you look at debt as a means of allowances and salaries for an open blood test civil servants due to the quality there's more to worry about now all right let's look at the flip side because some people still believe there's a bit of an advantage to this but with the rising debt service to revenue ratio estimated by the old bank at approximately 96 percent in 2022 so mandal is saying this move is very good in reducing the federal government's debt service burden how do you reason all of that it's good in terms of when you look at the debt in itself is not bad it's just like any business sometime you need to expand you go to borrow but what we are saying why it's bad in this our instant is that some of this debt are borrowed because they cannot meet their salary and demands so especially with the ways and the means and then they are not able to use this working in synergy between the monthly and monthly and fiscal side to control inflation inflation is every month in every economy in the world but how seems to be out of control because we seem to do nothing about it so definitely I think there is there is a lot to be concerned about when you look at the Nigerian debt profile what we are trying to do it doesn't look workable at all I just before the incoming administration they need to find a way around and begin to see how they can obsess some of this debt and look at those debt that are not productive and get out of it I must say a very big thank you to you Muqtah for your time and of course all the analysis that you have brought in clarity you have made on these ways and means and the implication on Nigerian fiscal policy Mohammed Muqtah Mohammed is an international finance and economic analyst thank you for your time my pleasure thank you I would take a quick break will be coming back in a moment to look at the impact of the CBN's cashless policy visa be the new notes in circulation and all of that how it is in the country and how Nigerians are bearing the brunt in one moment after this quick break stay with us