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Economy bleeds as Senate amends CBN Act to allow for endless borrowing by FG

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In an emergency session on Saturday, the Senate hurriedly amended the CBN Act in order to empower the Apex bank to borrow more. This is coming few weeks after approving of N23.7 trillion Ways and Means loan to Federal government.

Senate had in December 2022 suspended debate on N23.7 trillion Ways and Means submitted to the National Assembly by President Muhammadu Buhari for approval following objection by some lawmakers .

The Lawmakers said president’s request was against the laws and wondered why the National Assembly was not notified when the amount was taken from the apex bank.

But, Senate in May 2023 later gave approval to N23.7 trillion Ways and Means.

It was learnt that 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.

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However, in an emergency session on Saturday, Senate amended the Act establishing the Central Bank of Nigeria (CBN) to increase the amount the federal government can borrow from the apex bank.

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.

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 exceed N219 billion (5 per cent of the government’s revenue in 2021).

At the Saturday session, Senate hurriedly amended the CBN Act to increase the total CBN advances to 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 will repay the loan — used to fund critical projects — with securities such as treasury bills and bonds issuance.

Meanwhile , Senate extended the implementation of 2022 supplementary budget till December 2023 from June 2023. The Supplementary budget as approved by the National Assembly is put at N819.5 billion.

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