FG pays N912.32bn interest on CBN loans in Q1, 2023
By Sodiq Adelakun
The Federal Government of Nigeria paid a staggering interest of N912.32bn in the first quarter of 2023 on loans obtained from the Central Bank of Nigeria through Ways and Means Advances.
This alarming figure, disclosed in the Q1, 2023 Budget Implementation Report by the Budget Office of the Federation, has raised concerns about the country’s growing debt burden.
The amount spent on interest payments in this quarter alone is a staggering 161.47 per cent higher than the N348.92bn paid during the same period in 2022.
This significant increase has prompted experts to question the sustainability of the government’s borrowing strategy and its impact on the nation’s economy.
According to reports, the Federal Government had initially planned to allocate a whopping N1.2tn for servicing the loans obtained from the Central Bank through the Ways and Means Advances.
This translates to approximately N300bn to be spent quarterly, highlighting the government’s intention to manage its debt obligations effectively.However, the reality of the interest payments in Q1, 2023, has raised concerns about the feasibility of this plan.
With the interest payments alone surpassing the projected quarterly amount, it is evident that the government may face challenges in meeting its debt obligations without compromising other critical sectors of the economy.
The rising debt burden has sparked debates among economists and policymakers, with some expressing concerns about the potential consequences.
Critics argue that excessive borrowing can lead to inflation, currency devaluation, and a weakened economy. They stress the need for the government to explore alternative means of financing its operations and reduce its reliance on loans.In response to these concerns, the Federal Government must prioritise fiscal discipline and explore avenues for revenue generation to reduce its dependence on loans.
Furthermore, there is a need for transparency and accountability in managing the country’s debt. The government should provide regular updates on its borrowing activities, including the purpose of the loans and their expected impact on the economy.
However, it had spent about 76.03 per cent of its budget for the interests on the ways and means advances.
Ways and Means Advances is a loan facility used by the central bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.
According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government with regard to temporary deficiency of budget revenue at such rate of interest as the bank may determine.
The Act read in part, “The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.
“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.”
The Act placed a limit of five per cent on how much the Federal Government could borrow, although the previous administration severely violated the limit.
However, the House of Representatives of the 9th National Assembly, amid protest, approved an amendment to the CBN Act, raising the ceiling of Ways and Means Advances from the apex bank from five to 15 per cent of the Federal Government’s previous year’s revenue.
The House gave the approval at an emergency sitting, in concurrence with the Senate, which held an emergency plenary to consider and approve some economic bills.
The National Assembly made the move amid criticisms that the Federal Government had obtained WMAs beyond the five per cent threshold of the CBN.
