The Central Bank of Nigeria’s advances to the federal government rose 2900 per cent in the last seven years to N23.8 trillion, an unprecedented rise that violated the law, stoked inflation and worsened the country’s debt burden.
Central banks sometimes help governments to fund budget deficits, but such loans, called Ways and Means Advances, are tightly controlled as they can fuel inflation and distort monetary policy.
In May 2015 when the Buhari administration came to office, the CBN’s loans to the federal government stood at N789.7 billion cumulatively. Since then, the government has drawn central bank loans each year at an unprecedented level.
Between January and October 2022 alone, the government drew N5.6 trillion. By comparison, between December 2012 (the earliest date the CBN has released data for) and May 2015, a period of two and half years, ways and means advances rose by N654.9 billion.
As his administration winds down, President Muhammadu Buhari made an attempt on Wednesday to obtain a delayed approval for the loan that had already been spent, causing an uproar in the Senate. Lawmakers rejected the request and accused the president of violating the constitution. They also demanded details of how the money was spent.
The CBN Act says the CBN may grant temporary advances to the federal government in respect of temporary deficit of budget revenue at such rate as the bank may determine. It however warns that the total amount of such advances outstanding “shall not at any time exceed five (5) percent of the previous year’s actual revenue of the Federal Government.”
In addition, it stipulates that, “All advances 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.”
Analysts say all requirements of that legislation have been breached by the CBN under Godwin Emefiele and Finance Minister Zainab Ahmed.
If the regulation had been followed, the ways and means to the government for the entire 2022 should not exceed N219 billion (5 per cent of the government’s revenue in 2021).
The bank’s loan as of December 2015 stood at N856 billion; it rose to N2.2 trillion in December 2016, and reached N3.3 trillion in December 2017.
By December 2018, the figure rose to N5.4 trillion and reached N8.7 trillion in December 2019. The amount was N13.1 trillion by December 2020 and N17.4 trillion by December 2021. It is now N23.8 trillion.
In October, the government said it was converting the CBN loans to bonds with a maturity of 40 years and an interest rate of nine per cent, effectively transferring the bill to the next generation.