See Reason Senate Amends Act To Increase FG’s Borrowing Limit

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The Ways and Means provision permits the government to borrow from the central bank if it requires short-term or emergency financing to cover fiscal deficits caused by delayed cash receipts expected by the government. However, the CBN’s N22.7 trillion loan to the federal government violated the law, as the advances are far in excess of the limit the central bank is authorized to extend.

 

Section 38 of the CBN Act states, “The Bank (CBN) may grant temporary advances to the Federal Government for temporary budget deficits at a rate determined by the Bank.” “The total outstanding balance of such advances shall never exceed five percent of the previous year’s actual Federal government revenues.” If the CBN had followed its own regulations, its loan to the government for the entirety of 2022 should not have exceeded N219 billion (five percent of the government’s revenue in 2022).

 

 

CBN

Senate Amends Act To Increase FG’s Borrowing Limit From CBN On Saturday, during an emergency session, the Red Chamber amended the CBN Act to increase the maximum CBN advances to the federal government from 5% to 15%. During a lead debate on the bill, the Senate Majority Leader, Ibrahim Gobir, stated that the amendment would allow the government to meet its immediate and future obligations regarding the approval of ways and means by the National Assembly and advances to the Federal Government by the CBN. The federal government unlawfully borrowed and spent N22.7 trillion without the approval of the National Assembly.

 

The federal government had stated that it would repay the loan, which was used to fund vital projects, through the issuance of securities such as treasury bills and bonds. President Muhammadu Buhari asked the Senate to approve his proposal to securitize the loan last year, but the Red Chamber denied the request due to a lack of specifics.

 

Earlier in May, however, the Senate approved the request on the recommendation of its special committee established to review the president’s request and the submissions made by the finance ministry and CBN.

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