Over the weekend, the former CBN Governor Emir Sanusi Lamido Sanusi accused the government and the CBN of violating Section 38.1 of the CBN Act 2007 by extending overdrafts exceeding 5% of prior year actual revenues.
As part of our coverage of this fast developing story, we took a look at the Budget Implementation report of 2015 and highlighted a portion of the report where the government said as follows;
As our banker the FGN is entitle to raise credit from the CBN through the mechanism of ways and means subject to 12.5% of FGN’s revenue. This amount will be retired and therefore not considered as new borrowing outside the borrowing approved to finance budget deficit.
We were shocked because the CBN Act 2007 clearly mentioned 5% as the cap and not 12.5% as quoted by the Budget Office in its implementation report. However, on a radio show (Business Express on Smooth FM) attended by Nairametrics Founder, Ugo Obi-chukwu, one of the guest on the show, Wale Okunrinboye pointed out that the government may indeed have been relying on CBN Decree 1991 as a benchmark for loaning billions to the government. See screenshot
Now compare to what is in the CBN 2007 Act
Strangely, the Budget office may have realised this gaffe and thus amended the fourth quarter Budget Implementation Report of 2015 where it hitherto included the statement that it was relying on 12.5% of actual revenues to receive lending from the CBN. However, as the screenshot of a copy of the BIR we had before the change depicts, they indeed relied on 12.5% in the 4th quarter report.
This is what the original BIR had.
Nevertheless, they did not change the BIR report for Q1-Q3 and still carried the same clause as it still remained in the second quarter BIR
As you can see from above the government appears to have either deliberately flouted the act or shockingly relied on a defunct 1991 decree to embark on one of the largest government borrowing from the CBN seen in recent times. (see chart below;)