Corporate finance expert and economist, Tilewa Adebajo, expressly stated any efforts by the government and Central Bank of Nigeria to securtise ways and means without constitutional amendment would be a violation.
This statement was made after it was pointed out that the national ways and means cap was still a pending issue as it had not been properly handled or settled. It was also stated that the government, despite the current debt situation, still plans to borrow up to 7 billion to fund market women all over the country.
In an ARISE NEWS interview on Tuesday, Adebajo stated, “There is no law in place that says the government can securitise ways and means finances. And there is no president in Nigeria according to Nigerian law that can send a request to the Nigerian senate to tell them to securitise ways and means. The only way it can be done is to amend Section 38 of the CBN act. That has not been done.“
Several suggestions have been made, including from foreign outlets, stating that the government should perhaps take time to study the economy before taking steps to establish policies for better understanding in their quest to revive it. This is in light of the national inflation rate going to an all time high of almost 30% in August. Also looking at the issue of the Naira losing value in the FX market against higher currencies.
Earlier in the interview, Adebajo stated that though the aim of the subsidy removal was to save the nation about ten to fifteen billion for economic investments, he also noted that this has been proven difficult as the price a with petroleum is being bought in the nation is not in line with global market prices.
Many stated that this was the government’s way of slowly reinstating the fuel subsidy. In a statement from NNPC’s Managing Director Mele Kyari, he stated that the government had no plans of making a return of subsidy.
However, according to Adebajo, “Of course there is subsidy. I get information from the world markets, as all prices go up, the subsidies will erode and you have to increase that. But the other side which we never take into consideration is that when the oil prices drop, the fuel price will also drop. So we need to understand the dynamics and that’s not what we’ve been able to deal with.
“It’s rather unfortunate that we looked at a mechanism for closure of the window, but unfortunately the issues within the CBN balance sheet which was after exposure has meant that that couldn’t work. We saw the challenges with the reserves and the JP Morgan report that our net reserves are close to about four billion. That is where the problem is, we don’t have enough of the dollars to be able to manage that system.
“All these issues can be addressed by restructuring the balance of the CBN.”
Adebajo recommended that there is a great need for the government to balance out their sheets in terms of debts before embarking on other projects.
“We need to reduce the ways and means to the right limit and we need to amend Section 38 to allow whatever it is they are carrying in their balance sheet. Once you do that we need to look at the swaps we have with the banks. Make sure we structure them so they can help with the foreign exchange.
“Then all those intervention loans, if you look at the CBN balance sheet it’s a big loss. We need to reconcile those loans, take them out to development banks. Bank of industry, bank of agriculture and development bank of Nigeria. Those three banks have. The capacity to originate loans and also manage them.“