In what seemed like an unusual setting, the senate convened on Saturday to amend the Central Bank of Nigeria, CBN Act 2004, to increase the borrowing threshold for the Federal Government from 5% to 15%, under the Ways and Means borrowing plan.
With this, the CBN is expected to give the Federal Government 15% of the total revenue generated in the previous year, under Ways and Means Advances.
The Ways And Means advanced by the Central Bank of Nigeria is a funding option to the Federal Government to cater for short-term, or emergency finance, to fund delayed government expected cash receipt of physical deficit.
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Presenting the bill, the Senate Leader, Ibrahim Gobir (Sokoto East), explained that the adjustment was required to enable the Federal Government to meet its immediate and future obligations, in the approval of the Ways And Means Advances to the Federal Government.
The CBN, under its Ways and Means Advances, had extended about N22.7 trillion in loans to the Federal Government as of December 19, 2022.
The Senate recently approved the request of the President, Muhammadu Buhari, to restructure the N22.7 trillion loan from the CBN, extended to the Federal Government, under its Ways and Means provision.
According to the lawmakers, the N22.7 trillion borrowed and spent by the Federal Government was without the approval of the National Assembly, which is a violation of the law.
The lawmakers had noted that the CBN’s N22.7 trillion loan to the Federal Government is far above the threshold the apex bank is empowered to grant the government.
According to the CBN Act, the Ways and Means must not exceed five per cent of the previous year’s revenue.
“The CBN Act, Section 38(2) & (3) states that, “Ways and Means shall not exceed 5% of the previous year’s revenue of the Federal Government.”
Section 38 of the CBN Act
“Notwithstanding the provisions of Section 34(d) of this Act, the Bank (CBN) may grant temporary advances to the Federal Government, in respect of temporary deficiency of budget revenue, at such rate as the bank may determine.
The total amount of such advances outstanding shall not at any time exceed five (5) per cent of the previous year’s actual revenue of the Federal Government.
With this amendment of extending the borrowing threshold from 5% to 15%, it is expected to give legal backing to the excess borrowings in the last 7 years.
(Editor: Ifeanyi Mark)
