House of Reps Concurs With Senate, Amend CBN Act To Allow FG Borrow More Through Ways And Means
The House of Representatives has amended the section of the Central Bank of Nigeria Act that provides for ways and means.
The amendment was made at an emergency session on Sunday.
The ways and means are the channels through which the Nigerian government borrows from the apex bank.
Section 38 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 — (a) 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 (b) 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 the legislators amended the Act to raise the lending limit of the apex bank to the federal government from five to fifteen per cent.
Currently, the FG is indebted to the CBN at the tune of N23.1trn and has securitised the amount in a 50 year-bond at the interest rate of nine per annum.
The moratorium (on principal only) is three years while repayment was amortised over thirty-seven (37) years.
The lawmakers believe the amendment would aid the FG meet its obligation on the condition that revenues are limited.
The passage of the bill by the Reps is coming barely 24 hours after the Senate passed the same bill.