‘Nigerians indirectly paying for CBN’s unregulated lending to FG through high inflation’

NIGERIAN’S are indirectly paying for the Central Bank of Nigeria’s (CBN’s) unregulated over-lending to the Federal Government through raging inflation, says an economist,  Adetilewa Adebajo.

The CBN has through the lending window, officially called Ways and Means Advances, lent the Federal government the sum of N23.7 trillion, which the borrower is struggling to repay.

Adebajo, the chief executive officer of CFG Advisory, said the lending had been pushing up Nigeria’s inflation rate and making cost of lending to banks go higher.

The economist, discussing the economic challenges before the incoming administration of Bola Tinubu Wednesday on Arise Television, stressed the importance of institutional reforms of the CBN, Ministry of Finance and the Ministry of Industry, Trade and Investment to drive economic growth.

He said, “There has to be alignment of monetary and fiscal policies. Lack of it was the greatest undoing of the current administration.

“Right now, the economy is not attracting enough capital inflow because of how poorly it has been managed. There is an underperformancce of capacity even when Nigeria remains Africa’s largest economy.”

On the danger the Federal government’s massive borrowings from the CBN constituted to the economy, Adebajo maintained that the inability to repay was responsible for rising inflation, rising cost of borrowing, and crowding out of the private sector from business.

The Federal government had at some point sought to securitise the debts, but economic experts condemned the move as unwise economically.

Adebajo advised the Federal government to adopt options within the Debt Management Office (DMO) Act to refinance N23.7 trillion of Nigeria’s total debts, instead of securitising it.

He proposed a resolution trust, a special purpose vehicle (SPV) backed by legislation within the current DMO Act and framework for refinancing of the nation’s burgeoning debts, as against securitising the ways and means debt financing on the CBN balance sheet.

He suggested that the Federal government should, as a matter of urgency, stop financing the country’s debts through ways and means, which he described as “illegal.”

The economist advised the President-elect to ensure proper coordination of the economic team, saying Tinubu himself should, in fact, take charge of the process.

He expressed concern that the CBN had, as an institution, become weak, pointing out that its Governor violated the CBN Act without any consequences.

“The institution has been weakened, and its integrity needs to be restored,” he asserted.

Adebajo said Nigeria was a $1 trillion economy underperforming because of productivity and human capacity not impacting the economy. “Once the economy is growing at 7.5 per cent annually, it would solve job creation problems,” he posited.

He said the next President’s focus should be structural reforms, concessioning, and opening up of different aspects of the economy.

“For instance, the government does not need to be running airports and too many other things,” he said.

The ICIR had reported how the apex bank had been violating Section 38 of the Act governing it by overlending the sum of $49.2 billion to the Federal government through Ways and Means.

Section 38(2)of the CBN Act 2007 provides that lending to the government should not exceed five per cent of the previous year’s actual revenue.

The ICIR checks showed that with respect to revenue accruals, lending to the Federal government should not have exceeded $450 million, but had spiked to $49.2 billion, through CBN’s Ways and Means.

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.

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