The Senate has amended the Act establishing the Central Bank of Nigeria (CBN) to increase the amount the federal government can borrow from the apex bank.
The Red Chamber passed the amendment at an emergency session held on Saturday.
The CBN, under its Ways and Means Advances, had extended about N22.7 trillion loan to the federal government as of December 19, 2022.
The Ways and Means provision 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.
But the CBN’s N22.7 trillion loan to the federal government violated the extant law as the advances are far above the threshold the apex bank is empowered to grant the government.
Section 38 of the CBN Act states: “The Bank (CBN) may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate as the Bank may determine.
“The total amount of such advances outstanding shall not at any time exceed five (5) percent of the previous year’s actual revenue of the Federal Government.”
If the CBN had adhered to its laws, its loan to the government for the entire 2022 should not have exceed N219 billion (5 per cent of the government’s revenue in 2021).
At an emergency session on Saturday, Red Chamber amended the CBN Act to increase the total CBN advances to the federal government from five percent (5%) to a maximum of fifteen percent (15%).
The Senate Leader, Ibrahim Gobir, during a lead debate on the bill, said the amendment was to enable the government meet its immediate and future obligation in the approval of the ways and means by the National Assembly and advances to the Federal Government by the CBN.
The N22.7 trillion was borrowed and spent by the federal government without approval of the National Assembly in violation of the law.
The federal government had said it would repay the loan — used to fund critical projects — with securities such as treasury bills and bonds issuance.
President Muhammadu Buhari had last year asked the Senate to approve his proposal to securitize the loan but the Red Chamber rejected the request, citing lack of details.
The Senate, however approved the request earlier in May following the recommendation of its special committee set up to review the presidential request and the submission made by finance ministry and CBN.