- Says FG borrowed repeatedly from apex bank to save Nigeria’s economy
The Senate has approved the request of President Muhammadu Buhari to restructure the N22.7trillion loan from the Central Bank of Nigeria extended to the Federal Government under its Ways and Means provision.
The Senate Leader, Ibrahim Gobir, who led the Senate in the debate for the approval of the Ways and Means on Wednesday, explained that part of the money was given as loans to states.
Gobir added that the Special Committee set up by the Red Chamber to scrutinise the fiscal document, put up the report after ‘critical analysis and review of submissions made by the Federal Ministry of Finance, Budget, and National Planning; and the CBN
The Senate Leader said the panel discovered that the Ways and Means balance was initially N19. 3trn (N19.326,745,239,660.20) as of June 30, 2022 but later grew to N22.7trn (N22,719,704,774,306.90 ) as of December 19, 2022 as a result of financial obligations to ongoing capital projects and additional expenditures which includes domestic debt service gaps and interest rate.
He noted that the Senate on Wednesday, December 28, 2022, approved the sum of N819, 536,937,813 from the N1trn additional request made by the president leaving an outstanding balance of N180.4bn being the accrued interest on the sum.
Gobir added that the House of Representatives had earlier approved the additional N1trn Ways and Means Advances requested by the President to enable the smooth implementation of the supplementary budget.
He said, “Part of the Ways and Means monies were given to State Governments as loans to augment budgetary shortfall in their various States.
“Most of the requests for funds for an increase in Ways and Means were made to Mr President on the need to finance the budget due to revenue shortfall. Such requests were either made by the Hon. Minister of Finance, Budget and National Planning or the Central Bank Governor.
“The Federal Government as a result of revenue shortfalls occasioned by the COVID-19 pandemic and low oil prices, relied heavily on the Ways and Means to finance its budget deficit to keep the country working for the people.”
The Senate leader added, “The monies received by the Federal Government were actually used for funding critical projects across the country.
“That due to the serious shortfall in Government Revenue, the Federal Government in order for the economy not to collapse, was compelled to borrow repeatedly from the CBN, exceeding the 5 per cent threshold of the prior year’s revenue as stipulated by the CBN Act, 2007.
“That the Federal Government through the Ministry of Finance, Budget, and National Planning has concluded plans to convert the CBN loans to tradable securities such as treasury bills and bond issuance.”
He noted that the Senate Special Committee after exhaustive deliberations, recommended among others, the restructuring of N22.7trn for Ways and Means Advances be approved because the advances were made to ensure that the government does not shut down.
The panel further sought the approval of the Senate for the sum of N180.4bn being the balance of the supplementary budget and the interest accrued on the Ways and Mean Advances.
Other recommendations were, “If there is a need to exceed the five per cent threshold of the prior year’s revenue, recourse must be made to the National Assembly for approval.
“The Federal Government should begin the process of recovering the portion of the Ways and Means given as the loans to State Governments as further deferment of the repayment of the loans by the States will not be healthy for the economy.
“The Federal Government through the Ministry of Finance, Budget and National Planning should expedite action on the repayment of the loans through treasury bills and bond issuances.
“The National Assembly will not condone future increases in the Ways and Means without seeking the approval of the National Assembly.”
Meanwhile, the Senate President, Ahmad Lawan, after the approval of the fiscal document, noted that the Ways and Means Advances was a global practice.
He, however, faulted the process adopted by the executive arm of government which failed to carry the National Assembly along while accumulating a huge amount of loans.
Lawan added that the Senate had to pass the Ways and Means Advances so that the federal parliament would be able to consider and pass the 2022 Supplementary Budget still pending before the two chambers.
The Ways and Means provision allows the government to borrow from the apex bank if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.
Since the government started experiencing a significant shortfall in revenue, it has relied heavily on the Central Bank to finance its expenditure programmes via Ways and Means which balance as of December 19, 2022, stood at N22.7trn.
The Federal Government had said it would repay the loan with securities such as treasury bills and bonds issuance.
Buhari had last year asked the Senate to approve his proposal to securitise the loan but the Red Chamber rejected the request, citing a lack of details.
Buhari, while appealing to the Senate to reconsider its stand, said failure to grant the securitisation approval will cost the government about N1.8trn in additional interest in 2023.