In Contravention Of CBN Act, FG Sets 40-Year Timeline To Repay N20trn ‘Ways And Means’ Loan

Despite the outcry that have greeted the massive borrowing of the Federal Government from the Central Bank of Nigeria through ‘Ways and Means’ lending, the Minister of Finance, Mrs Zainab Ahmed has revealed that the loan would be repaid in the next 40 years.

The Federal Government borrows money from the CBN through Ways and Means Advances to finance budget deficits.

Figures obtained from the Central Bank of Nigeria showed that the Federal Government is indebted to the apex bank to the tune of over N20trn.

Speaking on the Federal Government’s indebtedness to the CBN, Ahmed said that her ministry has received approval to securitize the loan over a 40 years period, with an interest rate of nine percent.

She said currently, the government has been paying the interest component that is charged on the facility.

The Finance Minister said, “On the way and means, the total ways and means today is N20trn and we have approval to securitize, securitization will be over a forty years period, with an interest rate of nine percent but over the years, we have been paying the interest component that is charged on it.

Findings showed that the borrowings from the CBN are in contravention of the CBN Act which prescribes that the Federal Government should liquidate its debt with the apex bank before embarking on fresh borrowings.

However, the Federal Government has consistently failed to liquidate its debt with the lender of the last resort but has continuously borrowed from it.

The apex bank, on the other hand, has failed to exercise its power to decline lending to the Federal Government as the Act empowers it to do.

Further investigation showed that the Ways and Means Advances debt ballooned to unprecedented proportions during the tenure of President Muhammadu Buhari.

The Federal Government’s borrowings from the bank as of June 2015 stood at N648.26bn. This was a month after Buhari came to power. Recall that Buhari took over the reign of government from President Goodluck Jonathan on May 29, 2015.

However, as of September this year, the Ways and Means Advances to the Federal Government had ballooned to N20trn.

This means that within a period of seven years, Buhari borrowed N19.90tn from the CBN. This shows 3,070.29 per cent increase in ways and means financing within a seven-year period under Buhari.

Section 38 of the CBN Act, 2007 stipulates that the outstanding advances to the government at any point in time should not exceed five per cent of the previous year’s actual revenue.

It also empowers the apex bank to decline providing further advances should the Federal Government fail to repay the outstanding loans.

The CBN Act said, “Notwithstanding the provisions of section 34 (d) of this Act, 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.

“AlI 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 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 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 securitization by way of issuance of treasury bills, bonds, certificates or other forms of security which is required to be underwritten by the Bank.”