The Federal Executive Council has approved the issuance of promissory notes for the settlement of debts owed local contractors worth N740 billion.
The Minister of Finance, Mrs Kemi Adeosun, gave the hint while addressing newsmen after the Federal Executive Coucil meeting, adding that debts to GENCOS, DISCOs and state governments stood at N193.69 billion.
“The memorandum that the Council approved was for the issuance of a promissory note programme to settle inherited debts to local contractors and state governments on the part of Federal Government.
“These obligations had accrued prior to our coming into office and are across a number of sectors.
“We had pension liabilities, salaries some of which go back to 2006; unpaid salaries from 2012 to 2015; pensions to former Nigeria Airways staff from 2009, the Export Expansion Grant which was suspended in 2014; there are actually obligations on that between 2007 and 2014 when they were suspendend.
“What the government has agreed to do is to issue a promissory note, which is effectively an IOU.
“We are going to issue IOUs to the contractors and to those who Federal Government is obligated.
“Those promissory notes would mature over the next 10  years.
“So basically what we are doing is solving a long standing problem of contractor arrears.’’
The minister noted that the obligations were a drag on the economy because many of the contractors owed the banks which in turn had non-performing loans.
She said that the promissory notes had liquidity status meaning that the banks could accept them from the contractors and trade them to improve the banks’ non-performing loans.
She said that because of the government debts, there was illiquidity in such places as the power sector.