With barely 21 days to the May 29 hand over to an new administration, Nigeria may sink deeper into both local and international debt, as the Nigerian Senate on Wednesday, reversed itself on its earlier decision not to approved the request of President Muhammadu Buhari to restructure the N22.7 trillion loans the Central Bank of Nigeria (CBN) extended to the federal government under its Ways and Means provision and approved loans.
Recall that the upper chamber had on 22nd December 2022, turned down President Buhari’s request to authorize the Central Bank of Nigeria (CBN) to restructure the payment of the N22.7trillion loans under it’s Ways and Means provision.
Debate on this subject had divided the Red chamber, resulting to opposition lawmakers raising their voices in condemnation of the ruling APC government bad governance on that faithful day, which led to putting the discussion on the issue on hold.
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.
Since the government started experiencing a significant shortfall in revenue, it has relied heavily on the Central Bank to finance its expenditure programmes via Ways and Means which balance as of December 19, 2022 stood at N22.7 trillion.
The Federal Government had said it will repay the loan with securities such as treasury bills and bonds issuance.
Buhari, while appealing to the Senate to reconsider its stand, said failure to grant the securitization approval will however cost the government about N1.8 trillion in additional interest in 2023.
The Senate Leader, Ibrahim Gobir, who led the Senate in the debate for the approval of the Ways and Means on Wednesday, explained that part of the money were given as loans to states.
Gobir added that the Special Committee set up by the senate to scrutinize the fiscal document, put up the report after ‘critical analysis and review of submissions made by the Federal Ministry of Finance, Budget and National Planning; and the Central Bank of Nigeria.
The Senate Leader said the panel discovered that the Ways and Means balance was initially N19,326,745,239,660.20 as of 30th June, 2022 but later grew to N22,719,704,774,306.90 as of 19th December, 2022 as a result of financial obligations to on-going capital projects and additional expenditures which includes domestic debt service gaps and interest rate;
He said the Senate on Wednesday, 28th December, 2022, approved the sum of N819, 536,937,813 from the one trillion naira additional request made by Mr. President, Commander-In-Chief of the Armed Forces leaving an outstanding balance of N180, 463,062,187 being the accrued interest on the sum;
The Senate Leader added that the House of Representatives had earlier approved the additional one trillion naira Ways and Means Advances requested by the President Commander -In-Chief of the Armed Forces to enable the smooth implementation of the supplementary budget;
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;
“That most of the request for funds for increase in Ways and Means were made to Mr. President on the need to finance the budget due to revenue shortfall.
“That the Federal Government as a result of revenue shortfalls occasioned by the COVID-19 pandemic and low oil prices, relied heavily on the Ways and Means to finance its budget deficit to keep the country working for the people.
“That the monies received by the Federal Government were actually used funding of critical projects across the country;
“That due to the serious short fall 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.
“That the Federal Government through the Ministry of Finance, Budget, and National Planning has concluded plans to convert the CBN loans to trade able securities such as treasury bills and bond issuance.”
Gobir said the Senate Special Committee after exhaustive deliberations, recommended among others, the restructuring of N22, 719,703,774,306.90 for Ways and Means Advances be approved because the advances were made to ensure that the government does not shutdown;
The panel further sought the approval of the Senate for the sum of N180,463,062, 187 being the balance of the supplementary budget and the interest accrued on the Ways and Mean Advances.
Other recommendations were, “That if there is a need to exceed the 5 per cent threshold of the prior year’s revenue, recourse must be made to the National Assembly for approval;
“That the Federal Government should 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;”
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Senate President, Ahmad Lawan, after the approval of the fiscal document, noted that the Ways and Means Advances was a global practice.
He, however, faulted the process adopted by the executive arm of government which failed to carry the National Assembly along while accumulating the huge amount of loans.
Lawan added that the Senate had to pass the Ways and Means Advances so that the federal parliament would be able to consider and pass the 2022 Supplementary Budget still pending before the two chambers.