The Centre for Social Justices (CSJ), a civil society organisation has faulted the recent amendment to the Central Bank of Nigeria Act, increasing advances the CBN can grant to the Federal Government of Nigeria from five percent to 15 percent.
It said the amendment contradicts best practices in fiscal responsibility and is an authorization of the Executive to create macroeconomic distortions through arbitrary and increased ways and means funding.
Lead Director of CSJ, Mr. Eze Onyekpere, in a statement made available to our correspondent, said that the extant section 38 of the CBN Act grants Federal Government of Nigeria access to ways and means financing in respect of temporary deficiency of budget revenue at such rate of interest as may be determined by CBN.
“The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of FGN. All Advances made pursuant to this authority shall be repaid – (a) 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 CBN to grant such further advances in any subsequent years shall not be exercisable, unless the outstanding advances have been repaid.”
Already the federal government is owing the CBN N22.7 trillion resulting from ways and means advances. In fact, just before the end of the last administration of Muhammadu Buhari, the government sought approval from the Senate for the conversion of the debt to bonds.
Onyekpere described the amendment as a misconceived route to meeting the needs and obligations of FGN and definitely cannot be the road to rejigging the economy. According to him, “It will rather create new macroeconomic challenges.”
He wondered if FGN has not been able to refund previous advances from the CBN at five percent of previous year’s revenue, what machinery did the amendment put in place to ensure that FGN will be in a position to repay 15 percent of previous years revenue by the end of its financial year
“There is evidence that previous advances from the CBN were in excess of the five percent rule and instead of reforms to ensure conformity with fit and good practices, a leeway is provided for deepening fiscal mischief,” he said.
“Previous high levels of advances led the Executive to incur over N23 trillion in ways and means which could not be repaid and had to be converted by the National Assembly to long term indebtedness contrary to the provisions of the CBN Act.
“S. 38 (1) of the CBN Act categorically states that such advance should be in respect to temporary deficiency of budget revenue and not as a means of funding the deficit budget as the Federal Government has resorted to in recent years. Over the years and in accordance with fit and good practices, ways and means has never been listed in the Appropriation Act as a source of funding the deficit.
“The option of resorting to ways and means to fund budgetary deficits further increases the already high inflation rate especially when done by printing money not backed by value. Thus, it erodes the value of the Naira, and real income; it reduces purchasing power of citizens.
“The amendment of the CBN Act did not follow due process; it was arbitrary and lacking in popular participation. There was no opportunity for a public hearing and publicity, to give room for Nigerians to make inputs on this very crucial matter with potentials to negatively affect overall economic growth and general welfare of the people.
“In the light of the foregoing, CSJ strongly appeals to President Bola Ahmed Tinubu to withhold assent to the bill. CSJ acknowledges the revenue challenges facing the nation but the implementation of this particular bill (if it becomes law) will create monumental macroeconomic challenges now and in the future.”