DESPITE violations that characterised previous borrowings, the Nigerian Senate has expeditiously passed a bill for an Act to amend the Central Bank of Nigeria (CBN)’s Act to increase the apex bank’s total advances (lending) to the federal government from 5 per cent to a maximum of 15 per cent.
The executive bill, sponsored by Bamidele Opeyemi, the senate leader passed first, second, and third reading during an emergency session of the Senate on Wednesday, July 31.
Ways and Means is a loan facility through which the CBN(as the lender of last resort) finances the federal government’s budget shortfalls. The facility allows the government to borrow from the CBN if it needs short-term or emergency finance to fund important projects.
This law was violated under the Senate Presidency of Ahmed Lawan when the CBN lent N23 trillion to the federal government beyond the threshold stipulated by the Fiscal Responsibility Act.
Meanwhile, the amendment bill initially proposed a borrowing limit of 15 per cent but several lawmakers however cautioned that the borrowing limit should not exceed 10 per cent to ensure fiscal discipline.
Consequently, during a clause-by-clause consideration of the bill, the Deputy Senate minority, Abba Moro, moved for an amendment, that the word 15per cent be substituted for 10per cent in clause 2. The majority of Senators supported this amendment.
Also, the senator representing Bauchi Central, Abdul Ningi, moved for an amendment, that the borrowing should only be limited to capital expenditure but lawmakers murmured in disapproval, and no lawmaker seconded his motion.
Opeyemi in his lead debate, explained that the very essence of the bill is to enable the federal government to meet its immediate and future obligations due to the government’s increasing need for funds to finance the budget deficits and other expenses.
“The Central Bank of Nigeria’s Advances to the federal government are essentially loans that the Central Bank of Nigeria provides to the government to help it meet its financial obligations. These Advances are typically short-term and are expected to be repaid by the government”, he said.
The S]senate leader further explained that the advances will provide immediate funds to address budget shortfalls finance essential government expenditures and help maintain financial market stability by preventing government default on its obligation.
He added that it will inject money into the economy, stimulating economic activity and potentially creating jobs.
He disclosed further that it would also enable the government to support critical sectors like agriculture, health care, and infrastructural development; and lower the government borrowing cost by providing cheaper funds than the traditional borrowing method.
“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 especially the Renewal Hope Infrastructural Development across the country.
“This is the first time that both the executive arm and legislative arm are passing a budget that has more capital than recurrent. I therefore urge you all to support the passage of this Bill”, Opeyemi added..
The ICIR in March reported that the Senate set up an ad-hoc committee to probe the N30 trillion Ways and Means loans of the Central Bank of Nigeria (CBN obtained under former President Muhammadu Buhari)
The probe committee, inaugurated on Monday, March 11 has not seen the light of the day, despite concerns by financial analysts that the CBN’s over-lending to the federal government influenced Nigeria’s rising inflation year-on-year.
The ICIR also reported at different times how the CBN violated lending to the Federal Government by exceeding the threshold stipulated by the Fiscal Responsibility Act.
There were concerns over failed oversight by the senators who sanctioned the approval without following what the Fiscal Responsibility Act stipulated.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.