Ways And Means: Senate raises CBN’s advances to FG to 15%

Expert Queries Lawmakers’ Decision
Four weeks after approving N22.7 trillion Ways and Means granted to the Federal Government by the Central Bank of Nigeria (CBN), the Senate has increased advances the apex bank could grant to the Federal Government from five per cent to 15 per cent.

However, the Chief Executive Officer (CEO) of Dairy Hills Limited, Kelvin Emmanuel, has said the Senate made the amendment without proper consultations with all stakeholders, noting that it was akin to executive recklessness.

The Senate had on May 4, 2023, approved the request of President Muhammadu Buhari to restructure the N22.7 trillion loans the CBN advanced to the Federal Government under its Ways and Means policy.

The motive for the amendment of the CBN Act attracted concerns from some lawmakers, who cautioned that it might be interpreted to mean that it was done to cover up for the approval the Senate earlier gave for the N22.7 trillion Ways and Means, as many had argued that the money exceeded the five per cent limit for advances from the CBN to the Federal Government.

Senator Betty Apiafi, (PDP, Rivers State), who said the issue of securitisation comes in because if it is raised to 15 per cent there was no way the Federal Government could pay the money within one year in accordance with the CBN Act.

“Are we keeping silent on the issue of securitisation or we are hoping that the incoming government’s use of Ways and Means will be extinguished within one year?” she queried.

The CBN Act stipulates that 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.”

It also stated that the CBN may grant temporary advances to the Federal Government in respect of temporary deficit of budget revenue at such rate as the bank may determine.

In addition, it stipulates that, “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.”

But in a special emergency plenary session held yesterday, the motive of which attracted serious suspicion from some senators, the Senate set aside the relevant sections of its rules, introduced the Bill for the amendment of the CBN Act, did the second, third reading and passed it .

Senate Majority Leader, Gobir Ibrahim Abdullahi, who presented the Bill before the Senate, explained that it seeks to amend the CBN Act to increase the total CBN advances to the Federal Government from five per cent to a maximum of 15 per cent.

He said: “The very essence of this Bill is to enable the Federal Government meet its immediate and future obligation in the approval of the Ways and Means by the National Assembly and advances to the Federal Government by the CBN.

“This amendment is very consequential and it needs the support of us all. This is to enable the Federal Government to embark on very important projects that will inflate and rejig the economy,” Abdullahi stressed.

The legislative exercise, however, attracted serious opposition from senators who expressed suspicion about the motive of the amendment.

Senator Gabriel Suswam (PDP, Benue State) said senators deserve an explanation on the motive for amending the CBN Act.

Responding, Senate President Ahmad Lawan explained that the amendment would give the next government more opportunity to such advances.

Querying the move, Emmanuel noted that under President Muhammadu Buhari, temporary overdrafts rose from N869 billion to N26 trillion over an eight-year period.

According to him, the development was fuelling the currency depreciation and corresponding devaluation, has accelerated both cost-push and demand-pull inflation and led to record increases of the MPR that has made capital so expensive that businesses are shutting down, despite the evidence that inflation is not responding to MPR hikes.

He wondered why the raising happened without establishing a debt ceiling that would make it difficult for any successive government to violate the limits without approval of the Senate in a majority vote.

He added: “It becomes difficult to accept that the 9th National Assembly actually understands what it is doing. There’s a global precedence in Lebanon, Ghana, Venezuela, Sri Lanka on the impact of excessive and reckless borrowings through Quantitative Easing at their Central Banks on exchange rate, debt servicing, convexity of the bonds market, credit rating, monetary tightening and its negativity impact on the economy.”