The Central Bank of Nigeria may print or wire over N746bn as a loan to the Federal Government based on the Ways and Means provision of the CBN Act.
In the Act, funds that the apex bank should provide to the Federal Government through Ways and Means is five per cent of the Federal Government’s previous year’s revenue.
Last week, the National Assembly raised the maximum borrowing percentage in the Act from five per cent to ten per cent.
Data from the National Bureau of Statistics on Saturday indicated that as of the third quarter of 2023, the Federal Government’s actual aggregate revenue was N7.46tn.
Based on the hike in Ways and Means funding approved by the National Assembly, the Federal Government would get no less than N746bn from the apex bank through the funding scheme.
The Ways and Means Advances are loan facilities used by the CBN to finance the government during periods of temporary budget shortfalls and are subject to limits imposed by law.
According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government with regards to temporary deficiency of budget revenue at such rate of interest as the bank may determine.
The Act read in part, “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.”
The maximum borrowing percentage in the Act was hiked from five per cent to ten per cent by lawmakers last week, as they also rescinded and re-enacted the 2024 Appropriation Act through an amendment bill sponsored by leaders of both chambers.
In the Senate, the increase in the threshold was achieved through the consideration and passage of a bill sponsored by its Leader, Senator Opeyemi Bamidele (APC Ekiti Central).
In his lead debate, Senator Bamidele explained that the bill seeks to amend the CBN Act to increase the total CBN advances to the Federal Government.
He stated that the bill aims to help the government meet its immediate and future obligations due to the increasing need for funds to finance budget deficits and other expenses.
“The Central Bank of Nigeria’s advances to the Federal Government are essentially loans that the Central Bank of Nigeria provides to the government to help it meet its financial obligations. These advances are typically short-term and are expected to be repaid by the government,” he said.
Senator Bamidele explained that the request to increase the threshold from five per cent to fifteen per cent of the previous year’s revenue was made to provide immediate funds to address budget shortfalls, finance essential government expenditures, maintain financial market stability, inject money into the economy, and support critical sectors like agriculture, healthcare, and infrastructure development.
He said this would also lower government borrowing costs compared to traditional borrowing methods.
During the debate, many Senators supported the amendment but argued that the 15 per cent should be reduced to ten per cent.
However, the Federal Government had in the past taken excessive advantage of Ways and Means loans.
The administration of former President, Major General Muhammadu Buhari (retd.), had come under heavy criticism for abusing the Ways and Means.
From 2014 to 2023, the Federal Government collected N30tn through Ways and Means from the CBN without National Assembly appropriation.
Following this, the Senate set up an Ad-hoc committee led by Senator Isah Jibrin (APC, Kogi East), to carry out investigations.