The Senate on Wednesday approved President Muhammadu Buhari’s request to restructure the N22.7 trillion loan the Central Bank of Nigeria (CBN) extended to the Federal Government under its Ways and Means provision.
Ways and Means provision allows government to borrow from the CBN if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.
Following FG’s experience of significant shortfall in revenue, it has been relying heavily on the CBN to finance its expenditure programmes via Ways and Means, which balance as of December 19, 2022 stood at N22.7 trillion.
Federal Government had said it would repay the loan with securities such as treasury bills and bonds issuance.
Last year, President Buhari had asked the Senate to approve his proposal to securitize the loan but the upper Chamber rejected the request, citing lack of details.
But while appealing to the Senate to reconsider its stance, Buhari said failure to grant the securitization approval would cost the government about N1.8 trillion in additional interest in 2023.
But Senate approved the request on Wednesday following the recommendation of its special committee set up to review the presidential request and the submission made by Finance ministry and CBN.
The Red Chamber also approved the sum of N180.4bn, being the balance of the supplementary budget and the interest accrued on the Ways and Means advances.
Chairman of the Committee, Senator Ibrahim Gobir, told his colleagues that N22.7 trillion advances were made to ensure that the government does not shutdown as a result of revenue shortfalls.
He said the monies received by the Federal Government were actually used for funding of critical projects across the country.
He said, “Due to the serious shortfall in government revenue, the Federal Government in order for the economy not to collapse, was compelled to borrow repeatedly from the CBN, exceeding the 5 percent threshold of the prior year’s revenue as stipulated by the CBN Act, 2007.”
He said part of the Ways and Means monies were given to State Governments as loans to augment budgetary short fall in their various States.
But the Senate urged the Federal Government to expedite action on the repayment of the loans through treasury bills and bond issuances.
It also advised the government to 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.