The House of Representatives on Tuesday, approved the request by President Muhammadu Buhari, to increase the federal government’s Ways and Means loan from the Central Bank of Nigeria (CBN) by N1 trillion.
The loan, which the federal government said it will use to fund the 2022 Supplementary Budget, was approved after deliberation and adoption by the committees on finance, banking and currency, and aids, loans and debts management.
The National Assembly passed the N819.5 billion Supplementary Budget in late December, which is for the ministry of Agriculture, Water Resources, FCT and Works. A breakdown of the budget shows that the Ministry of Agriculture is to get N69 billion, Ministry of Water Resources N15.5 billion, FCT N30 billion and Ministry of Works and Housing N704 billion.
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However, the budget is to be funded by additional borrowing and will increase Nigeria’s budget deficit to 8.17 trillion naira and deficit to GDP ratio to N4.43 percent.
The federal government said the budget had become necessary due to the devastation that came with the flooding Nigeria experienced late last year. However, funding the budget was a challenge. The federal government sought approval from the National Assembly to secure funding from its easiest lender – the CBN.
“The ways and means advances by the Central Bank of Nigeria to the federal government has been a funding option to the federal government to cater for short term or emergency finance to fund delayed government expected cash receipt of physical deficit,” Buhari had said in his letter to the National Assembly seeking approval for the central bank loan.
But the house, after approving the loan request, deferred the request to securitize the N23.7 trillion ways and means loans, pending “further engagement with the executive by the joint committee to allow for a thorough and detailed work and submissions”.
The speaker of the House of Representatives, Femi Gbajabiamila, said the N23.7 trillion request would be considered after the lawmakers resume from recess.
The Senate had in early January, said the request to securitize the Ways and Means loans will be considered, but after the examination of all the necessary documents.
“We will insist on getting the right documents for our committees to ensure that whatever they advise us to do in the two chambers are based on information and knowledge and not just passing ways and means without knowing what it is,” Senate President Ahmed Lawan said.
The CBN, in violation of the CBN Act, which prohibits it from lending more than 5% of the federal government’s previous year’s revenue, has been yielding to federal government’s loan requests since 2015. Now the N23.7 trillion loan has become a disturbing part of Nigeria’s public debt.
The federal government now seeks to convert it to long term bonds. The Minister of Finance, Budget and National Planning, Zainab Ahmed, said the idea is to reduce the interest rate among other things.
“If passed, it will bring significant fiscal relief to the federal government considering a moratorium of 40 years and interest rate of nine percent. President Buhari has urged the National Assembly to pass it and we are hopeful they will,” Ahmed stated.