Senate at emergency session, amends CBN Act to increase borrowing limit for FG

The Senate on Wednesday amended the Central Bank of Nigeria (CBN) Act to increase the borrowing limit the bank can offer the federal government from five per cent to 10 per cent.

The borrowing, popularly called Ways and Means, is a loan facility through which the CBN finances the federal government’s budget shortfalls.

The Senate President, Godswill Akpabio, announced the increment during an emergency plenary on Wednesday after many of the senators supported it through voice votes.

It was read for the first and second time and committed to the Committee of the Whole where the clauses were considered before final passage.

Mr Akpabio said the increase would support the government to finance its shortfalls.

He urged Nigerians to shun violence in the process of agitating for the end of bad governance.

“We urge Nigerians to shun any act of violence. The government is doing a lot, we in the parliament are also doing a lot,” Mr Akpabio added.

Ways and Means

The Ways and Means is a recurring loan the CBN issues to the federal government to finance shortfalls in the government budget.

In March 2022, the Debt Management Office (DMO) announced that the federal government borrowed a total of N18.16 trillion from the CBN.

The debt as of then was more than 40 per cent of the money supply in the economy.
In February, the Senate constituted an ad-hoc committee chaired by Isah Jibrin (APC, Kogi East) to probe the Ways and Means loan amounting to N30 trillion obtained by the administration of former president Muhammadu Buhari from the CBN.

The committee has yet to submit its report.

Debate

While leading a debate on the amendment, the Senate Leader, Opeyemi Bamidele, explained that the essence of the increment was to enable the government to meet its immediate and future financial obligations.

“The essence of the bill is to enable the federal government to meet its immediate and future obligations due to the increasing need for funds to finance the budget deficit and other expenses.

“The Central Bank of Nigeria advances to the federal government are essentially loans that the Central Bank of Nigeria provides to the government to help meet its financial obligations. These advances are typically short-term and are expected to be repaid by the government,” he said.

The senate leader said the bill would provide for immediate funds to address budget shortfalls and finance essential projects of the federal government.

He also said it would help the government to maintain financial stability and stimulate the economy.

He further stated that it will “Provide immediate funds to address budget shortfalls and finance essential government expenditure.

“Help maintain financial market stability that will prevent government default on its obligations.

“Inject money into the economy, thereby stimulating economic activity and potentially creating jobs.

“Enable the government to support its critical sectors like agriculture, and infrastructure development.

“Lower the government borrowing cost by providing cheaper funds than the traditional borrowing method.”

Contributions

Many of the senators who contributed to the debate support the increment.
Adetokunbo Abiru (APC, Lagos East) said the bill was seeking to provide financial backup to the federal government.

Mr Abiru, chairperson of the Senate Committee on Banking, Insurance and other Financial Institutions, commended the Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS) and other government agencies for improving their revenues.

Babangida Hussaini (APC, Jigawa North-west) proposed that the borrowing limit should not exceed 10 per cent.

Ahmed Wadada (SDP, Nasarawa West) expressed displeasure that the federal government may not be able to refund the loan if the limitation is increased to 10 per cent.

“From records, it is not in doubt that the government will not be able to redeem its indebtedness,” he said.

Mr Wadada proposed that the government invest in the capital market to increase its revenue rather than depending on the CBN.

“To reduce the financial engagement of commitment in developing our structure, we must not necessary be subjecting the country to only Ways and Means, the capital market is there as a measure for government to issue bond for infrainfrastural which will enable the citizenry invest. We cannot continue to be treading on one path. When we exhaust it, where do we have to go?” he said.

Adams Oshiomole (APC, Edo North) said it is realistic for the government to meet up with refunding of the loan.

Adeola Olamilekan (APC, Ogun West) said there is a need to increase the borrowing limit from five per cent to 10 per cent.
Responding to the debate, the senate president said the Ways and Means would be used to finance shortfalls of the federal government.

“This is not actually borrowing. This is just advances from the Central Bank of Nigeria to the Federal Government of Nigeria for the purpose of augmenting any shortfall. We are not borrowing from outside Nigeria.

“Whether you call it borrowing or advances, it doesn’t matter,” Mr Akpabio said.