The Nigerian Senate approved President Muhammadu Buhari’s request to restructure the N22.7 trillion loans advanced by the Central Bank of Nigeria to the federal government under its Ways and Means policy.
The Ways and Means provision permits the government to borrow from the central bank if it requires short-term or emergency financing to cover fiscal deficits caused by delayed financial receipts expected by the government.
The government of Buhari stated that it pursued the loans when the country began experiencing a significant revenue shortfall.
It stated that it relied significantly on the central bank to finance its expenditure programmes via Ways and Means, which had a balance of N22.7 trillion as of December 19, 2022.
The federal government had indicated that it would repay the loan through the issuance of securities such as treasury bills and bonds.
Buhari had asked the Senate to authorise his plan to securitize the loan a year ago, but the Red Chamber denied the request due to a lack of specifics.
In his appeal to the Senate to reconsider its position, the president stated that failure to grant securitisation sanction would cost the government approximately N1.8 trillion in additional interest in 2023.
Wednesday’s debate on the approval of Ways and Means was conducted by Senate Leader Ibrahim Gobir, who explained that a portion of the advances were given to states as loans.
Gobir added that the Special Committee established by the Red Chamber to examine the fiscal document compiled the report after conducting “a critical analysis and review of submissions from the Federal Ministry of Finance, Budget, and National Planning; and the Central Bank of Nigeria.”
The panel discovered that the Ways and Means balance was initially N19,326,745,239,660.20 as of 30th June, 2022, but grew to N22,719,704,774,306.90 as of 19th December, 2022, due to financial obligations to ongoing capital projects and additional expenditures, such as 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 N1 trillion additional request made by the president, leaving an outstanding balance of N180, 463,062,187, being the accrued interest on the sum.
Gobir stated that the House of Representatives had also approved the additional N1 trillion in Ways and Means Advances requested by the president in order to facilitate the execution of the supplemental budget.
He added, “A portion of Ways and Means funds were loaned to state governments to make up for budgetary shortfalls in their respective states. That 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.
“These requests were made either by the Honourable Minister of Finance, Budget, and National Planning or the Governor of the Central Bank. That 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.
“That the monies received by the federal government were actually used funding of critical projects across the country;
“That 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 five per cent threshold of the prior year’s revenue as stipulated by the CBN Act, 2007.
“That the federal government through the Ministry of Finance, Budget, and National Planning has concluded plans to convert the CBN loans to tradeable securities such as treasury bills and bond issuance.”
Gobir, said the Senate Special Committee after exhaustive deliberations, recommended among others, the restructuring of N22,719,703,774,306.90 for Ways and Means Advances be approved because the advances were made to ensure that the government does not shutdown.
According to him, the panel further sought the approval of the Senate for the sum of N180,463,062,187 being the balance of the supplementary budget and the interest accrued on the Ways and Means Advances.
Other recommendations were, “That if there is a need to exceed the five per cent threshold of the prior year’s revenue, recourse must be made to the National Assembly for approval;
“That the federal government should begin the process of recovering the portion of the Ways and Means given as the loans to state governments as further deferment of the repayment of the loans by the States will not be healthy for the economy;
“That the federal government through the Ministry of Finance, Budget and National Planning should expedite action on the repayment of the loans through treasury bills and bond issuances.
“That the National Assembly will not condone future increase in the Ways and Means without seeking the approval of the National Assembly.”
Senate President, Ahmad Lawan, after the approval of the fiscal document, noted that the Ways and Means advances was a global practice.
He, however, faulted the process adopted by the executive arm of government which failed to carry the National Assembly along while accumulating the huge amount of loans.
Lawan added that the Senate had to pass the Ways and Means Advances so that the federal parliament would be able to consider and pass the 2022 Supplementary Budget still pending before the two chambers.
Lawan said, “I don’t see any National Assembly standing against any infrastructure development like building of roads and bridges among others. It is therefore very important that before the executive incurred this kind of huge Ways and Means Advances, should, as a matter of must, seek the approval of the National Assembly.
“Where for, whatever reason, an emergency happened, it should not take them this kind of period before a request is sent to the National Assembly for approval.
“We have to pass this Ways and Means Advances because we don’t want the government to be shut down.
“The Supplementary budget 2022, is on hold at the moment because we could not pass the Ways and Means request.
“However, with the passage of the Ways and Means Advances today, the Supplementary budget 2022, which essentially is to rehabilitate damage roads and bridges across the country, will be fixed.”