The Nigerian Senate on Wednesday approved N22.7 trillion spent by the executive arm of government as Ways and Means borrowings from the Central Bank of Nigeria (CBN) without the initial approval of the National Assembly.
Ways and Means is a loan facility through which the CBN provide loans to the government to bridge the yearly budget’s revenue shortfalls.
The approved borrowings by the government had over the past months generated controversies between the Executive and some members of the Legislature, especially the legislators in opposition parties who rued what they termed the illegality of the fiscal action.
The Red Chamber approved the request of the Executive during plenary following the Senate leader, Sen. Ibrahim Gobir’s presentation of the Report of the Finance and Budget Committee of the whole House.
According to data from the apex bank, the Federal Government borrowed N6.3 trillion from it from January to October 2022
As of the end of November 2022, the government’s borrowings, which were not included in the total public debt stock – federal and state governments – stood at N42.84 trillion.
Section 38 of the CBN Act, 2007, stipulates that the total amount of Ways and Means Advances outstanding shall not at any time exceed 5 percent of the previous year’s actual revenue of the federal government.
However, the borrowing data from the apex bank repeatedly indicated that the government exceeded the 5 percent threshold.
The Act reads in part: “All advances shall be repaid as soon as possible and shall, in any event, be repayable by the end of the federal government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.”
The apex bank in a statement on its website lamented that consistently funding the Federal Government’s fiscal deficit through Ways and Means Advances could frustrate its monetary policy initiatives.
It clarified: “The direct consequence of central banks’ financing of deficits are distortions or surges in the monetary base, leading to adverse effects on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy.”
