Nigeria’s government has asked parliament to amend its spending law to enable a debt program to settle 2.7 trillion naira ($8.6 bln) worth of obligations including pensions and salary arrears, according to a letter from Vice President Yemi Osinbajo.
The letter, read out in the Senate on Tuesday, requested amendments to the law, which stipulates allocation of government spending, to allow Nigeria to fund recurrent expenditure from proceeds of the debt rather than just capital projects.
Nigeria’s Fiscal Responsbility Act states that proceeds of government borrowings can only be applied towards capital expenditure. Osinbajo said the amendment was to provide the legal backing for the use of the debt to meet the obligations.
The vice president sent the letter to the Senate last month while President Muhammadu Buhari was on medical leave in Britain. The letter was read out after the Senate reconvened following a seven-week recess.
Africa’s biggest economy grew out of recession in the second quarter as oil revenues rose, but the pace of growth was slow, suggesting the recovery is fragile.
Osinbajo’s letter said the obligations had become inimical to government plans to revive the economy through the provision of modern infrastructure and settle pension and salary arrears dating back five years.
Finance Minister Kemi Adeosun has said the government plans to refinance $3 billion worth of treasury bills denominated in naira with dollar borrowing to lower costs and improve its debt position.
($1 = 314.50 naira)
Writing by Chijioke Ohuocha; Editing by Alexis Akwagyiram/Mark Heinrich