The Senate has okayed the controversial request of President Muhammadu Buhari to restructure the ₦22.7 trillion loans the Central Bank of Nigeria (CBN) extended to the federal government under its Ways and Means provision.
Africa Today News, New York understands that the Ways and Means provision is that allows the government to borrow from the apex bank if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.
Since the government started experiencing a significant shortfall in revenue, it has relied heavily on the central bank to finance its expenditure programmes via Ways and Means whose balance as of the 19th of December, 2022 stood at ₦22.7 trillion.
The federal government has already revealed that it will repay the loan with securities such as treasury bills and bonds issuance.
Recall that last year, President Buhari wrote the Senate asking them to approve his proposal to securitise the loan but the Red Chamber rejected the request, citing lack of details.
Buhari, while appealing to the Senate to reconsider its stand, said failure to grant the securitisation approval will however cost the government about ₦1.8 trillion in additional interest in 2023.
Senate Leader Ibrahim Gobir, who led the Senate in the debate for the approval of the Ways and Means on yesterday, explained that part of the money was given as loans to states.
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Gobir added that the special committee set up by the Red Chamber to scrutinise the fiscal document put up the report after ‘critical analysis and review of submissions made by the Central Bank of Nigeria and the Federal Ministry of Finance, Budget, and National Planning.
The Senate Leader said the panel discovered that the Ways and Means balance was initially ₦19,326,745,239,660.20 as of 30th June, 2022 but later grew to ₦22,719,704,774,306.90 as of 19th December, 2022 as a result of financial obligations to on-going capital projects and additional expenditures which include domestic debt service gaps and interest rate. He said the Senate on Wednesday, 28th December, 2022, approved the sum of N819, 536,937,813 from the ₦1 trillion additional request made by Mr. President, Commander-In-Chief of the Armed Forces leaving an outstanding balance of ₦180, 463,062,187 being the accrued interest on the sum;
According to him, the House of Representatives had earlier approved the additional ₦1 trillion Ways and Means advances requested by the president to enable the smooth implementation 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 serious short fall in government revenue, the federal government in order for the economy not to collapse, was compelled to borrow repeatedly from the CBN, exceeding the 5 percent threshold of the prior year’s revenue as stipulated by the CBN Act, 2007.