Senate Approves Restructuring Of FG’s N22.7trn Unbudgeted Loans From CBN
The Senate yesterday approved the request of President Muhammadu Buhari to restructure the N22.7 trillion Ways and Means loan advanced to the Federal Government by the Central Bank of Nigeria (CBN).
The approval followed the consideration of the report of the Senate’s Special Committee on Ways and Means chaired by Senate Leader, Senator Ibrahim Gobir (APC – Sokoto East).
The Ways and Means provision allows the Federal Government to borrow short-term or seek emergency finance from the CBN to fund delayed government’s expected cash receipts of fiscal deficits.
Since the government started experiencing a significant shortfall in revenue, it has relied heavily on the apex bank to finance its expenditure programmes.
The funds advanced to the Federal Government under the Ways and Means provision stood at N22.7 trillion as of December 19, 2022.
Buhari had last year requested the Senate to approve his proposal to securitise the loan but the Red Chamber rejected the request, citing lack of details.
Buhari had appealed to the Senate to reconsider its stand, insisting that failure to grant the securitisation approval would cost the government about N1.8 trillion in additional interest in the year.
Senate President, Ahmad Lawan, after the approval of the President’s request, 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 National Assembly would be able to consider and pass the 2022 Supplementary Budget still pending before the two chambers.
Lawan said: “Let me emphasize on recommendation six that the National Assembly would not condone the way and manner the Ways and Means accrued over a long period of time.
“Ways and Means is not peculiar to our country. They become necessities but there are processes and practices and better ways of incurring them.
“First of all, the National Assembly is always there to consider the request of the executive in the national interest and 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 incur this kind of huge Ways and Means Advances, it is a must seek that they seek the approval of the National Assembly.
“And 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.
“But today with the passage of the Ways and Means Advances, the Supplementary budget 2022, which essentially is to rehabilitate damaged roads and bridges across the country, will now kickstart.
“I urge the executive even though they are going on May 29 but even one day is important. The government is a continuum we should start implementing the Supplementary Budget 2022 alongside budget 2023 in earnest.”
Earlier, the Senate Leader, Gobir, in his report explained that part of the money were given as loans to state governments
Gobir added that the special committee to scrutinize the fiscal request, put up the report after ‘critical analysis and review of submissions made by the Federal Ministry of Finance, Budget and National Planning; and the Central Bank of Nigeria.
The Senate Leader said the panel discovered that the Ways and Means balance was initially N19,326,745,239,660.20 as of 30th June, 2022 but later grew to N22,719,704,774,306.90 as of 19th December, 2022 as a result of financial obligations to on-going capital projects and additional expenditures which included 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 Buhari leaving a balance of N180, 463,062,187 being the accrued interest on the amount.
He said the House of Representatives had earlier approved the additional N1 trillion Ways and Means Advances request by Buhari to allow for the smooth implementation of the supplementary budget.
Gobir said: “Part of the Ways and Means monies were given to state governments as loans to augment budgetary shortfall in their various 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.
“Such requests were either made by the Hon. Minister of Finance, Budget and National Planning or the Central Bank Governor.
“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 for 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 deliberation, recommended among others, that 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.
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 Mean 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.”
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