One year after the request on legacy debts by the Federal Executive Council (FEC), the National Assembly has approved N2.7 trillion promissory notes to offset federal government’s indebtedness to local contractors, pensioners and oil marketers.
The promissory notes approved cover non-discounted N740 billion outstanding pensions and promotional salary arrears and the discounted N1.93 trillion obligations including contractors and suppliers.
The approval by the federal lawmakers came a fortnight ago according to sources at the Presidency who noted that it was delayed until now by the directives to the Nigerian National Petroleum Corporation (NNPC) to pay directly into federation account.
“The National Assembly has approved the FEC request on promissory notes to settle government’s legacy debts ” said the source who craved anonymity.
“We expect the president to give a go-ahead order in the weeks to come for the implementation of the settlement programme” he said.
He noted finance Ministry now awaits President Muhammadu Buhari’s directives on the settlement programme that is expected to improve liquidity in the economy and bring succour to critical sectors like the banking sub-sector which currently battle huge bad loans owing to inability of contractors to repay credit granted them.
Non-Perfoming loans in banks’ books according to the Nigeria Deposit Insurance Corporation (NDIC) stood at N2.424 trillion by September 2017, rising by 50 percent over N1.639 trillion figure of 2016.
The lawmakers’ approval is upon the request of the FEC which at one of its meeting in July 2017 approved the issuance of promissory notes to settle indebtedness to local contractors, pensioners and oil marketers.
Under the settlement programme, confirmed and validated suppliers and contractors are to be settled with liquid promissory notes (ten-year tenor) phased over three years period to minimize impact on liquidity and giving preference to those willing to give the largest discounts.
Pensions and employees benefits are to settled through the issuance of specific bond instruments which also will be over a three-year period.
These obligations are to be incorporated into the medium-term expenditure framework by the ministry of budget and national planning.
The payment is also expected to bring Succour to pensioners some of whom had been owed years of benefits by the government.
The finance minister, Kemi Adeosun had after the FEC meeting of July 11 2017 announced the approval by the council to issue liquid promissory notes (10-year tenure) phased over a three year period to minimize impact on liquidity and with preference to those willing to offer discounts.
Some of the obligations which dated back as far as 1994 will critically enhance liquidity in critical sectors of the economy.
The FEC’s approval is sequel to the recommendations of a March 2017 committee set up by the Economic Management Team and chaired by the Finance Ministry to find solutions to legacy debts within federal government institutions and agencies.
The committee drew membership from the Justice Ministry, Budget and National Planning, Power, Works and Housing, Trade and Investment, and the Debt Management Office.
Others with representatives on the committee are Office Of then Accountant- General Of the Federation, Nigerian Custom Service, CBN, and the Nigerian Export Promotion Council.
The committee was to confirm the validity of inherited obligations consisting of dues to state governments, oil marketers, power generation and distribution companies, suppliers and contractors to federal government parastatals, payments due under the Export Expansion Grant (EEG), outstanding judgment balances as well as pension and other benefits.
The committee after reconciliation, provisionally discounted a total of N2.7 trillion obligations consisting of N740 billion of outstanding pensions and promotional salary arrears ( not discounted) and N1.93 trillion (discounted) of other obligations including dues to federal government contractors and suppliers.
Adeosun last year noted that the numbers were aligned with government estimates and in some cases, lower than the previous estimates