The Federal Government’s promissory note debts rise by 60 per cent in four years despite significant repayments, Sunday PUNCH has learnt.
According to Investopedia.com, 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.
Sunday PUNCH observed that promissory notes first appeared on the public debt record of the Debt Management Office in December 2018 as N331.27bn.
By December 2022, it had risen to N530.03bn, which means the Federal Government piled up N198.76m extra promissory debt in four years while paying off redeemable notes.
It was N732.62bn in 2019, N971.66bn in 2020 and N762.54bn in 2021.
Since they are mostly non-interest-bearing notes, it means that the Federal Government offered at least a total of N971.66bn promissory notes, which was the highest figure in 2020, and redeemed at least N209.12bn since 2020.
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.
Among other reasons, she said, “the government has been issuing promissory notes to settle obligations, for which it doesn’t really have the revenue or cash. That is why the debt stock has been growing.”
Last year, The PUNCH reported that the Federal Government would pay off five promissory notes worth N311.73bn, which would all mature in 2022.
While payment for three promissory notes would be made to state governments, the remaining two would be made to judgement creditors.
This was according to a document titled, ‘Schedule of promissory notes issued by category as of December 2021’, which is available on the website of the Debt Management Office.
Sunday PUNCH also observed that a total of 43 promissory notes were issued between 2018 and 2021, with 12 issued in 2021 to only judgement creditors. Sixteen promissory notes have matured, while only five will mature in 2022.
Sunday PUNCH had also reported that the Presidency of Major General Muhammadu Buhari (retd.) might pass on at least $715.86m judgment debts to the next administration.
The judgment debts were listed as 18 promissory notes by the DMO.
Section 4 of the Government Promissory Notes Act states that government promissory notes are paid from the general revenue and assets of the federation.
It read in part, “The principal sums and interest represented or secured by any Government promissory notes are hereby charged upon and shall be payable out of the general revenue and assets of the Federation.”
