Economy
US hits debt ceiling, prompting Treasury to take extraordinary measures
CNN — The US hit the debt ceiling set by Congress on Thursday, forcing the Treasury Department to start taking extraordinary measures to keep the government paying its bills and escalating pressure on Capitol Hill to avoid a catastrophic default. The battle lines for the high-stakes fight have already been set. Hardline Republicans, who have enormous sway in the House because of the party’s slim majority, have demanded that lifting the borrowing cap be tied to spending reductions. The White House countered that it will not offer any concessions or negotiate on raising the debt ceiling. And with the solution to the debt ceiling drama squarely in lawmakers’ hands, fears are growing that the partisan brinksmanship could result in the nation defaulting on its debt for the first time ever – or coming dangerously close to doing so.
Treasury Secretary Janet Yellen wrote a letter to House Speaker Kevin McCarthy Thursday, informing him that the nation’s outstanding debt is at its statutory limit of $31.4 trillion and that the agency will implement extraordinary measures so it doesn’t default on its debt, which would have enormous consequences on the US economy, global financial stability and many Americans. She said the measures would expire on June 5. This buys Congress some time – but how long the extraordinary measures can last is subject to “considerable uncertainty,” she wrote, stressing that it’s a challenge to forecast how many financial obligations the federal government must pay and how much revenue it will take in months into the future.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” she wrote. The announcement follows the warning Yellen sent last week about the approaching debt limit and the temporary Band-aid of the extraordinary measures. But her missive has failed to spark bipartisan discussion so far. Instead, both Republicans and Democrats reaffirmed their rigid positions over the past week. National Economic Council Director Brian Deese on Thursday repeatedly called on Congress to meet the United States’ obligations by raising the debt limit, warning against “economic chaos” that could ensue should Congress fail to do so. “This is about economic stability versus economic chaos,” Deese told Kaitlan Collins on “CNN This Morning,” calling it Congress’ “basic, fundamental obligation.”
He added, “Even just the specter that the United States might not honor its obligations does damage to the economy.” McCarthy must walk a fine line since any member can call for a motion to vacate the speaker’s chair, one of several concessions he made to gain the top post after 15 rounds of voting earlier this month. For now, he is leaning on using the debt ceiling crisis to cut spending and balance the US budget. On Tuesday, McCarthy rejected Democratic calls for a clean debt ceiling increase without any conditions attached – something Congress has done time and again, including under then-President Donald Trump. The speaker told reporters on Capitol Hill that the Biden administration should begin to negotiate ahead of this summer, when the US could default. “Why wouldn’t we sit down and change this behaviour so that we would put ourselves on a more fiscally strong position?” McCarthy said. President Joe Biden and McCarthy have not yet spoken Thursday about the debt limit, according to an official familiar with the dynamic. Hard-right GOP Rep Andy Biggs went even further in a tweet on Tuesday, writing, “We cannot raise the debt ceiling. Democrats have carelessly spent our taxpayer money and devalued our currency. They’ve made their bed, so they must lie in it.”
The White House on Wednesday blasted the Arizona Republican’s “stunning and unacceptable position” and once again rejected calls to reduce spending as part of a debt ceiling deal. While there were no meetings with congressional leadership to announce at this time, White House press secretary Karine Jean-Pierre told reporters that the administration has been reaching out “to all members, from both sides of the aisle,” but, “there will not be any negotiations over the debt ceiling– we will not do that, it is their constitutional duty.” The debt ceiling, which is the maximum amount the federal government is able to borrow to finance obligations that lawmakers and presidents have already approved, was last raised in December 2021. Created more than a century ago, it has become a way for Congress to restrict the growth of borrowing – turning it into a political football in recent decades. Increasing the cap does not authorise new spending commitments. Treasury will start using two extraordinary measures to allow it to temporarily continue financing the federal government’s operations, Yellen wrote on Thursday. They are mainly behind-the-scenes accounting manoeuvres. As part of the debt issuance suspension period, the agency will begin to sell existing investments and suspending reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Also, it will suspend the reinvestment of a government securities fund of the Federal Employees Retirement System Thrift Savings Plan. These funds are invested in special-issue Treasury securities, which count against the debt limit. Treasury’s actions would reduce the amount of outstanding debt subject to the limit and temporarily allow it to continue paying the government’s bills on time and in full.
No federal retirees or employees will be affected, and the funds will be made whole once the impasse ends, Yellen wrote. As part of his concessions, McCarthy promised to pass a proposal by the end of March telling Treasury which payments should be prioritised if the debt ceiling is breached, GOP Rep. Chip Roy confirmed to CNN last week. Roy, a Texas Republican who is one of the key players in the standoff over McCarthy’s speakership, cautioned that the contours of the proposal are still being worked out, noting there are several different versions of a payment prioritisation plan circulating inside the House GOP. But choosing to pay one set of obligations over another could spark legal challenges, as well as political and ethical quandaries. For instance, lawmakers would have to decide which to pay first – Social Security monthly payments to the tens of millions of senior citizens and Americans with disabilities, salaries of federal workers and the military or the interest on US debt to a multitude of investors, many of them foreign.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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