Senate approves restructuring of N22.7 trillion loans to PMB
The Senate has approved President Muhammadu Buhari’s request to restructure the N22.7 trillion loans extended to the federal government by the Central Bank of Nigeria (CBN) under the Ways and Means provision.
This provision allows the government to borrow from the apex bank in case of short-term or emergency finance needs to fund delayed government expected cash receipts of fiscal deficits.
As a result of the significant shortfall in revenue, the government has relied heavily on the central bank to finance its expenditure programmes via Ways and Means.
The balance of the loan as of December 19, 2022, stood at N22.7 trillion. The federal government has said it will repay the loan with securities such as treasury bills and bonds issuance.
Last year, President Buhari had asked the Senate to approve his proposal to securitize the loan, but the Red Chamber rejected the request, citing a lack of details.
However, President Buhari warned that failure to grant the securitization approval would cost the government about N1.8 trillion in additional interest in 2023.
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 was given as loans to states.
The Special Committee set up by the Red Chamber scrutinized the fiscal document after a 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 approved the sum of N819,536,937,813 from the one trillion naira additional request made by the 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 House of Representatives had earlier approved the additional one trillion naira Ways and Means Advances requested by the President to enable the smooth implementation of the supplementary budget.
The Federal Government relied heavily on the Ways and Means to finance its budget deficit due to revenue shortfalls caused by the COVID-19 pandemic and low oil prices.
The monies received by the Federal Government were actually used to fund critical projects across the country. The government 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.
The Federal Government, through the Ministry of Finance, Budget, and National Planning, has concluded plans to convert the CBN loans to tradeable securities such as treasury bills and bond issuance.
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 shut down.
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 made, including that recourse must be made to the National Assembly for approval if there is a need to exceed the 5 percent threshold of the prior year’s revenue. The Federal Government should begin the process of recovering the portion of the Ways and Means given as loans to State Governments. The National Assembly will not condone future increase in the Ways and Means without seeking its approval.
Senate President Ahmad Lawan noted that the Ways and Means Advances were a global practice. However, he 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, which is still pending before the two chambers.