FG Borrows Additional N3.77trn From CBN As Credit Hits N28.43trn

The Nigerian Government has borrowed an additional N3.77trn from the Central Bank of Nigeria as of February 2023.

Credit to the FG through ways and means has consequently risen to N28.43trn by the end of February 2023, an increase of N3.77trn from the N24.65trn which it was in December 2022.

The development is based on THE WHISTLER analysis of CBN’s data on ‘Money and Credit Statistics’.

Ways and means is an avenue of funding by the apex bank when the FG is short of revenue. The CBN finance government deficit through Ways and Means Advances subject (in some cases) to the limits set by existing regulations.

The apex bank was under severe criticism last year over the ‘illegal’ funding of the FG through ways and means which is in contravention of the provision of the CBN Act 2007.

Section 38 of the CBN Act, 2007 provides that, “The Bank may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate of interest as the Bank may determine.

“The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.

“All Advances made pursuant to this section shall be repaid as soon as possible and shall in any event be repayable by the end of the Federal Government’s 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 years shall not be exercisable, unless the outstanding advances have been repaid;

“And in such form as the Bank may determine provided that no repayment shall take the form of a promissory note or such other promise to pay at a future date or securitisation by way of issuance of treasury bills, bonds, certificates or other forms of security, which is required to be underwritten by the Bank.”

But despite not liquidating previous loans, the government has consistently borrowed from the CBN.

The data analysed by THE WHISTLER showed that Credit to Government (net) was N24,656,590,930,000 December 2022, but rose to N26,639,026,370,000 in January 2023 and later to N28,431,011,260,000 in February 2023.

The CBN admits that Ways and Means limits are “sometimes disregarded by the Federal Government,” adding, “the direct consequence of Central Banks financing of deficits are distortions or surges in monetary base leading to the adverse effect on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy.”

The borrowing from the apex bank is separate from the N44.06trn or $101.9bn debt owed by the FG to local and foreign creditors as of December 2022.

Moody’s Investors had in January 2023, downgraded the Federal Government’s long-term foreign-currency and local-currency issuer ratings as well as its foreign currency senior unsecured debt ratings to Caa1 from B3.

Moody’s rates debt obligation as Caa 1 when such obligations are adjudged to be speculative of poor standing and are subject to very high credit risk.

“The review for downgrade focused on Nigeria’s fiscal and external position and the capacity of the government to address the ongoing deterioration – other than by alleviating the burden of its debt through any form of default, including debt exchanges or buy-backs,” Moody’s said in the report seen by THE WHISTLER.

The CBN is liaising with the Debt Management Office to get approval from the National Assembly to securitise the ways and means for 40 years which also contravenes the Act establishing the CBN.

Expert like the Managing Director of the Centre for the Promotion of Private Enterprises, Muda Yusuf had argued that asides pressure in inflation figures which has risen to 21.91 per cent in February 2023, the private sector is also being crowded by FG borrowing from the CBN.