The Minister of Finance and Coordinating Minister of the Economy, Wale Edun has said the Nigerian National Petroleum Company (NNPC) Limited has commenced the repayment of $6 billion debt owed to suppliers.

Edun made this announcement during a meeting with investors in the U.S. capital on the sidelines of the 2024 annual meetings of the International Monetary Fund (IMF) and the World Bank.

The revelation came amidst growing concerns about the NNPC’s financial stability and its capacity to sustain petrol supply to the domestic market.

The company had previously acknowledged owing suppliers of premium motor spirit (PMS).

Addressing the issue of ongoing foreign exchange subsidies, Minister Edun clarified that “In terms of NNPC and their situation, the reality is that, although the subsidy on May 29, 2023, was removed and was no longer on the balance sheet of the government, it did rear its head, not in terms of petrol subsidy, but foreign exchange subsidy, which was borne elsewhere, and borne mainly by NNPC,” the minister said.

Mr Edun also expressed optimism about the company’s future.

“I think what I can say about their own situation is with where they are now, they have a route to paying down their payables and I’m sure that in no time at all, they will start.

“From what I understand, they have even commenced the process of paying down their payables,”he said.

The NNPC had some months ago acknowledged that it was owing the money, but admitted it was remitting money into the purse of the country.

“But NNPC Ltd., through its subsidiary, NNPC Trading, has many open trade credit lines from several traders.

“The company is paying its obligations of related invoices on a first-in-first-out (FIFO) basis,” he said.

“It is not correct to say that NNPC Ltd. has not remitted any money to the Federation Account since January. NNPC Ltd. and all its subsidiaries remit their taxes to the Federal Inland Revenue Service (FIRS) regularly.

“This is in addition to payments of CIT to road contractors under the Road Investment Tax Credit Scheme. In all, NNPC Ltd. is the largest contributor to the tax revenue shared every month at the Federation Account Allocation Committee (FAAC),” the NNPC had said in a statement in August.

The Nigerian Senate has passed a bill amending the Central Bank of Nigeria (CBN) Act to allow the federal government to double its Ways and Means advances from 5% to 10% of the previous year’s revenues.

This amendment unlocks N610 billion in central bank loans for 2024, yet significant legal obstacles remain in the path of accessing the funds.

The Senate’s decision comes as the federal government grapples with financial constraints and seeks innovative solutions to stimulate economic growth.

Under the previous limit, the CBN could only extend loans equivalent to 5% of the federal government’s revenues from the previous year.

With 2023 revenues reported at N6.1 trillion, the new amendment effectively raises the borrowing cap to N610 billion.

However, Section 38 of the CBN Act, which was also amended, includes a critical stipulation that the federal government cannot borrow from the CBN if there are any outstanding balances.

According to the Act, “All Advances made (to the federal government) shall be repaid…by the end of the financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the Bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.”

The federal government currently owes the CBN over N30 trillion, significantly complicating the new borrowing plan.

Although the CBN’s records show an outstanding balance of N8.21 trillion in Ways and Means advances at the end of December 2023, when including the N22.7 trillion in securitized loans, the total debt reaches N30.91 trillion.

This legal catch has sparked a debate among financial experts and policymakers. “The reality is that the government can no longer borrow via Ways and Means unless they pay back the outstanding N30 trillion,” a senior business leader told BusinessDay.

“Increasing the limit is of no consequence as it is also illegal to securitize Ways and Means to repay the CBN. What is required is comprehensive remedial legislation.”

Olayemi Cardoso, who was appointed as the CBN governor late last year, has expressed his awareness of the legal constraints and emphasized the need for fiscal responsibility.

Cardoso has reiterated that the CBN will not grant further loans to the federal government until the existing loans are repaid, citing compliance with Section 38 of the CBN Act.

“This is also in compliance with Section 38 of the CBN Act (2007). The Bank is no longer at liberty to grant further Ways and Means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled,” Cardoso told lawmakers.

Finance Minister Wale Edun has also declared an end to the government’s reliance on CBN loans, acknowledging the necessity for fiscal discipline and transparency.

“I am pleased to note the fiscal authorities’ efforts in discontinuing Ways and Means advances,” Edun stated during a Senate session.

The amendment’s timing is critical as Nigeria faces rising inflation fueled by a surge in money supply resulting from the extensive use of Ways and Means advances.

The CBN has tightened monetary policy to counter inflationary pressures, which were exacerbated by the substantial increase in money supply from N52.01 trillion in January 2023 to N68.25 trillion in November 2023.

The Senate’s approval of the N610 billion CBN loan marks a significant step towards addressing Nigeria’s economic challenges, but the outstanding debt must be resolved to make the new borrowing feasible.

The Federal Government of Nigeria has formally requested a $500 million loan from the World Bank to improve dam safety and enhance water resource management across the nation.

This loan, aimed at addressing the country’s pressing water security challenges, is expected to significantly boost agricultural productivity through the Sustainable Power and Irrigation for Nigeria (SPIN) Project.

The request was detailed in a World Bank Project Information Document released on Monday, highlighting the SPIN project’s focus on four critical areas: institutional strengthening and capacity building, irrigation modernization, improvements in dam operations and safety, and effective project management.

The World Bank’s proposed approval date for the SPIN project is September 26, 2024.

The project aims to reinforce federal and state institutions responsible for water resource management by developing national dam safety guidelines, providing training for water resources and irrigation management, and creating a comprehensive hydropower master plan.

“Nigeria faces water security challenges which impact water availability for drinking, energy, and food production, exacerbated by climate change,” the document stated. “Harnessing water storage and ensuring dam safety are central to climate change adaptation and mitigation in Nigeria. It is crucial for improving water management for supply, irrigation, and hydropower generation, and for protecting against floods and droughts.”

Nigeria boasts over 400 dams with an estimated total combined storage of 59 billion cubic meters. Of these, 46% are federally owned and managed by the Federal Ministry of Water Resources and Sanitation through River Basin Development Authorities, while 48% are state-owned.

However, many dams remain incomplete, and over 50% of the large dams built in the 1970s and 80s require rehabilitation due to inadequate budgets, human resources, and capacity for proper management, operation, and maintenance.

The 2022 floods, which caused an estimated $6.7 billion in economic damage, underscored the urgent need for improved dam safety and water management.

The SPIN project intends to rehabilitate and modernize 40,000 hectares of irrigated land and establish Water User Associations to manage these irrigation schemes efficiently.

Additionally, the project will focus on rehabilitating and enhancing the safety of priority dams, conducting risk assessments, preparing emergency action plans, and implementing structural safety improvements.

To ensure effective implementation, monitoring, and evaluation, the project will establish a Federal Project Management Unit and Technical Units at both federal and state levels.

This initiative by the Federal Government represents a significant step towards securing Nigeria’s water resources, ensuring sustainable agricultural practices, and protecting the country from the adverse effects of climate change.