The Senate has approved President Muhammadu Buhari‘s proposal to restructure the N22.7 trillion loans extended to the federal government by the Central Bank of Nigeria (CBN) under its Ways and Means provision.
The Ways and Means clause authorizes the government to borrow from the central bank in the event that it needs short-term or emergency funding to support delayed government expected cash receipts and fiscal imbalances.
Since the government began experiencing significant revenue shortfalls, it has relied heavily on the central bank to finance its expenditure programs through Ways and Means, which had a balance of N22.7 trillion as of December 19, 2022.
The federal government has stated that it will repay the debt through the issuing of securities, such as treasury bills and bonds.
Last year, President Buhari urged the Senate to approve his plan to securitise the loan, but the Red Chamber rejected it due to a lack of information.
While urging the Senate to change its position, Buhari stated that failing to obtain securitisation clearance will cost the government N1.8 trillion in additional interest in 2023.
Senate Leader Ibrahim Gobir, who led the Senate in the Ways and Means Committee debate yesterday, stated that some of the money was handed to states as loans.
Gobir went on to say that the report was produced following a “critical analysis and review of submissions made by the Central Bank of Nigeria and the Federal Ministry of Finance, Budget, and National Planning” by the special committee formed by the Red Chamber to scrutinize the fiscal document.
According to the Senate Leader, the panel discovered that the Ways and Means balance was initially N19,326,745,239,660.20 as of 30th June, 2022, but later increased to N22,719,704,774,306.90 as of 19th December, 2022 due to financial obligations to ongoing capital projects and additional expenditures such as domestic debt service gaps and interest rate. He stated that the Senate approved the sum of N819, 536,937,813 from the N1 trillion extra request made by Mr. President, Commander-In-Chief of the Armed Forces, leaving an outstanding balance of N180, 463,062,187 being the accrued interest on the sum on Wednesday, December 28, 2022.
According to him, the House of Representatives had previously approved the president’s request for additional N1 trillion in Ways and Means advances to ensure the smooth execution of the supplementary budget.
“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 request for funds for 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,” he said, adding that the monies received by the federal government were actually used in funding of critical projects across the country.
According to Gobir, due to the severe shortfall in government revenue, the federal government was forced to borrow repeatedly from the CBN in order to keep the economy from collapsing, exceeding the 5 percent barrier established by the CBN Act, 2007.
