The Federal Government is facing challenges redeeming promissory notes and other debt obligations maturing as the Central Bank of Nigeria (CBN) declines overdraft requests.
According to our sources, some of the promissory notes imminently due for payment could face potential default if the Federal Government does not find ways to meet the obligations.
The sources added that the CBN governor, Yemi Cardoso, told government officials that the apex bank will not be extending any overdraft to the government as that would mean increasing Ways and Means Advances.
The implication is that if the government fails to generate enough revenue for this debt, there is a likelihood that it may default on paying the promissory notes.
Other sources opine the option for the government agencies on the receiving end of the loans will be to set off some of their investment securities held with the apex bank against the loans that are fallen due.
According to data from the Debt Management Office in a document titled, Schedule of promissory notes issued by category as of September 2022 the Federal Government is expected to settle at least N283.5 billion promissory notes this year.
However, this may be higher as the DMO has not updated this payment schedule with recently issued promissory notes.
Further findings from the CBN Half-year 2023 economic report confirmed that there was a 47.2% increase in the amount of promissory notes issued within six months.
The report read:
Also, the DMO document showed that the Federal Government is expected to make payments to exporters, state governments, and oil marketing companies, alongside settling a dollar-denominated judgment debt in 2024.
A promissory note is a debt instrument that contains a written promise by one party (the note’s issuer or maker) to pay another party (the note’s payee) a definite sum of money, either on demand or at a specified future date.
The Director-General of the DMO, Ms Patience Oniha, recently said promissory notes, budget deficit and constant borrowing had led to an increase in public debt.
