The Senate and the House of Representatives on Wednesday passed a bill to increase the percentage of Ways and Means loans the Central Bank of Nigeria (CBN) can give to the Federal Government.
The upper chamber of the Nigerian legislature raised the credit facility obtainable by the Federal Government from the apex bank from 5% to 10% of the revenue of a fiscal year.
The Ways and Means facility allows the apex bank to provide short-term financing to the Federal Government to address budget shortfalls.
Amendment of the CBN Act
The Senate amended the CBN Act to allow the Central Bank of Nigeria to increase the total amount of advances (loans) provided to the Federal Government.
The Leader of the Senate, Opeyemi Bamidele, said the executive bill, read for the first time on Wednesday, is intended to enable the Federal Government to meet its immediate and future obligations due to the increasing need for funds to finance budget deficits and other expenses.
He explained that the loans would provide immediate funds to address budget shortfalls, finance essential government expenditures, and help maintain financial market stability by preventing the government from defaulting on its obligations.
Opeyemi and his colleagues argued that the margin of increase should be from 5% to 10%.
They said that while the increase is necessary for economic development, there should be adequate monitoring of capital projects to ensure that the funds are used exclusively for infrastructure and legacy projects.
After consideration in the Committee of the Whole, the executive bill scaled the third reading and was passed.
Like the Senate, the House of Representatives amended the CBN Act to raise Ways and Means from 5% to 10%.
President Bola Tinubu is expected to sign the amended bill into law in the coming weeks.
What you should know
The Ways and Means advance from the CBN has been exposed to all forms of misappropriation in the past, making this bill a very controversial one.
In May 2023, shortly before the end of the Buhari government, the Senate approved the request of the then President to restructure the N22.7 trillion loans the Central Bank of Nigeria (CBN) extended to the Federal Government under its Ways and Means provision.
However, stakeholders and financial experts criticized former President Muhammadu Buhari for exacerbating the country’s debt burden by securing over N22.7 trillion in Ways and Means Advances from the apex bank.
Section 38 of the CBN Act states that funds the federal government can borrow must not exceed 5% of the previous year’s actual revenue of the government. However, the loans received by the FG under Ways and Means exceeded the previous year’s revenue.
It states, “(1) Notwithstanding the provisions of section 34 (d) of this Act, the Bank Advances may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate of interest as the Bank may determine,”
In 2022, for instance, the actual revenue generated by the Federal government was N6.49 trillion whereas ways and means advances stood at N6.2 trillion.
