The Senate has amended the Central Bank of Nigeria (CBN) act
— increasing the “ways and means borrowing” threshold for the federal
government.
During an emergency session held on Saturday, the senate
raised the limit from a 5 percent threshold to a maximum of 15 percent that the
government can get from the CBN.
Ways and means is a loan facility through which the CBN
finances the government’s budget shortfalls.
The facility allows the government to borrow from the apex
bank if it needs short-term or emergency finance to fund important projects.
According to Ibrahim Gobir, senate leader, the amendment was
necessary to “enable the federal government to meet its immediate and future
obligation in the approval of the ways and means by the national assembly and
advances by the CBN”.
“Mr President, my respected colleagues, permit me to lead
the debate on this bill which seeks to amend the Central Bank of Nigeria (CBN)
act to increase the total CBN advances to the federal government from 5 percent
to a maximum of 15 percent,” Gobir said.
“The bill was read for the first time in this chamber on
Wednesday, 24th May, -2023.
“The very essence of
this bill my respected colleagues is to enable the federal government to 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 Central Bank
of Nigeria.
“This amendment is very consequential and it needs the
support of us all. This is to enable the federal government to embark on very
important projects that will inflate and rejig the economy.
“I, therefore, urge you all to support the passage of this
bill.”
Section 38 of the CBN act, 2007, stipulates that the total
amount of ways and means advances outstanding shall not at any time exceed 5
percent of the previous year’s actual revenue of the federal government.
But the federal government’s borrowings from the apex bank
have repeatedly exceeded the 5 percent threshold.
“All advances shall be repaid as soon as possible and shall,
in any event, be repayable by the end of the federal government financial year
in which they are granted and if such advances remain unpaid at the end of the
year, the power of the bank to grant such further advances in any subsequent
year shall not be exercisable, unless the outstanding advances have been
repaid,” the act reads in part.
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