Senate Approves Conversion of N22.7trn CBN Loans to FG to Bonds

By Aduragbemi Omiyale

The securitisation of the N22.7 trillion ways and means to the federal government for budget deficits has been approved by the Senate.

The approval was given by the upper chamber of the National Assembly at its plenary on Wednesday, months after President Muhammadu Buhari wrote a letter to the parliament on the issue.

The N22.7 trillion loans were given to the national government by the Central Bank of Nigeria (CBN) when it could not get short-term funds to run the country.

The CBN loans have caused controversies in the country because the apex bank violated the law to give such credit facilities to the government.

The CBN Act stipulates that only 5 per cent of the previous year’s revenue generated by the government should be loaned, but the bank went beyond this.

The administration of President Muhammadu Buhari approached the parliament to restructure the loans to 40-year bonds at a coupon rate of 9 per cent per annum.

While considering a report from its ad-hoc committee yesterday, the Senate said though the federal government exceeded the 5 per cent threshold of the previous year’s earnings as stipulated by the CBN Act, the loans were taken for the interest of the nation, which was facing a different crisis, including revenue shortfall, inflation and others.

A lawmaker, Mr Ibrahim Gobir, explained yesterday that part of the ways and means was given to state governments to enable them to remain functional and avert a crisis.

He informed his colleagues that the CBN loans were initially N19,326,745,239,660.20 as of June 30, 2022, but increased to N22,719,704,774,306.90 as of December 19, 2022, due to financial obligations to ongoing capital projects and additional expenditures which included domestic debt service gaps and interest rate.

“Part of the Ways and Means monies were given to state governments as loans to augment budgetary shortfall in their various states.

“That most of the requests for funds for an increase in Ways and Means were made to Mr President on the need to finance the budget due to revenue shortfall.

“Such requests were either made by the Hon. Minister of Finance, Budget and National Planning or the Central Bank Governor.

“That the federal government, as a result of revenue shortfalls occasioned by the COVID-19 pandemic and low oil prices, relied heavily on the Ways and Means to finance its budget deficit to keep the country working for the people.

“That the monies received by the federal government were actually used funding of critical projects across the country;

“That due to the serious shortfall in government revenue, the federal government in order for the economy not to collapse, was compelled to borrow repeatedly from the CBN, exceeding the five per cent threshold of the prior year’s revenue as stipulated by the CBN Act, 2007.

“That 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,” Mr Gobir said.