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General News of Sunday, 15 January 2023


Lawmakers, professionals lambast Buhari, Emefiele over CBN loans

CBN governor, Godwin Emefiele CBN governor, Godwin Emefiele

The Federal Government’s attempt to securitise the Ways and Means Advances is a continued breach of the Central Bank Act of 2007, according to some lawmakers, lawyers and economists.

The Ways and Means Advances are a loan facility through which the CBN finances the shortfalls in the government’s budget.

According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government regarding temporary deficiency of budget revenue at such rate of interest as the bank may determine.

Section 38of the Act read in part, “(1) …the Bank 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. (2) The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.

“(3) All Advances made pursuant to this section shall be repaid — (a) as soon as possible and shall in any event be repayable by the end of the Federal Government’s financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the Bank to grant such further advances in any subsequent years shall not be exercisable, unless the outstanding advances have been repaid;

“and (b) in such form as the Bank may determine provided that no repayment shall take the form of a promissory note or such other promise to pay at a future date or securitisation by way of issuance of treasury bills, bonds, certificates or other forms of security, which is required to be underwritten by the Bank.”

The continued lending to the Federal Government by the CBN despite not liquidating previous advances, according to the lawmakers, lawyers and economists, is unlawful as both the government and the apex bank have been in breach of Section 38(2), (3a) of the Act, while the current securitisation proposal will breach of Section 38(3b) of the law.

The World Bank had in November last year warned the Federal Government against financing deficits by borrowing from the CBN through the Ways and Means Advances, saying this was putting fiscal pressures on the country’s expenditures.

Even the CBN said on its website that the Federal Government’s borrowing from it through the Ways and Means Advances could have adverse effects on its monetary policy to the detriment of domestic prices and exchange rates.

“The direct consequence of central banks’ financing of deficits are distortions or surges in the monetary base leading to adverse effects on domestic prices and exchange rates i.e. macroeconomic instability because of excess liquidity that has been injected into the economy,” it said.

The PUNCH recently reported that the government borrowed N6.31tn from the CBN through Ways and Means Advances in 10 months.

This pushed the government’s borrowing from the apex bank from N17.46tn in December 2021 to N23.77tn in October 2022.

The N23.77tn owed the apex bank by the Federal Government is not part of the country’s total public debt stock, which stood at N44.06tn in the third quarter of 2022, according to the Debt Management Office.

The public debt stock only includes the debts of the Federal Government, the 36 state governments and the Federal Capital Territory.

The President, Major General Muhammadu Buhari (retd.), recently transmitted to the National Assembly a request for approval of Ways and Means Advances restructuring to the tune of N23.7tn. However, the Senate rejected the request.

Buhari later warned that the country would pay N1.8tn extra interest this year if the National Assembly rejected a loan-to-bond swap request on the CBN overdrafts to the government.

The PUNCH recently reported that the Federal Government paid interests of N4.12tn between 2019 and 2022 on the loans it got from the CBN through Ways and Means Advances, according to data from the Medium-Term Expenditure Framework and Fiscal Strategy Papers and the public presentation documents of the approved budgets by the Ministry of Finance, Budget and National Planning.

In 2019, the interest paid on the CBN loans was N339.45bn. The interest payments rose to N912.57bn in 2020 and N1.22tn in 2021.

For 2022, only data for January to November was obtained as the data for December 2022 had yet to be released.

Lawyers condemn FG

Some legal practitioners have condemned the action of the Federal Government regarding the borrowings beyond the level stipulated by law.

They say such action is troubling and threatens the sovereignty of the country.

Speaking on the issue, Kunle Adegoke, SAN, said there was no reason behind the action of the government.

He stated, “By the country’s monetary policy, there is a limit to which a government can borrow. The government cannot borrow in excess of 50 per cent of its income, and looking at the income of Nigeria as of today, there is no rationale for the level of borrowing the government has gone into.

“In international economic law, there is what we call sovereign insolvency. There are nations that have suffered that before. The most recent is the case of Greece. We may not continue to be that lucky. As things are right now, the country seems to be going on auto-pilot.”

Another lawyer, Daniel Makolo, condemned the actions of the government, adding that it was guilty of treason.

He said, “The CBN Act has a section where the Federal Government should not borrow more than a certain percentage of its income from the CBN and when they deliberately violate that, they have violated the constitution and the extant laws setting up of the Federal Republic of Nigeria.

“We now hear where the servicing of debt is not only at 30 per cent, but it is far more than that; it now means that you have deliberately sold and mortgaged the entire Nigeria into servitude and slavery, and that you sold the sovereignty of the country, including the people in it, their property and whatever they have, which you have a contract to protect.

“The government and those who take part in borrowing more than stipulated have committed not just an impeachable offence, but treason by abusing the public trust bestowed upon them to protect and preserve the people.”