Reps raise limit on CBN loans
The House of Representatives (HOR), amidst protest on Sunday, approved an amendment to the Central Bank of Nigeria Act, raising the ceiling of Ways and Means Advances from the apex bank from five to 15 per cent.
The House gave the approval at an emergency sitting, in concurrence with the Senate which held an emergency plenary earlier on Saturday to consider and approve some economic bills.
The National Assembly made the move amidst criticisms that the Federal Government had obtained WMAs beyond the 5 per cent threshold of the CBN.
According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government regarding temporary deficiency of budget revenue at such rate of interest as the bank may determine.
The continued lending to the Federal Government by the CBN despite not liquidating previous advances, according to the lawmakers, lawyers and economists, is unlawful as both the government and the apex bank have been in breach of Section 38(2), (3a) of the Act, while the current securitisation proposal will breach of Section 38(3b) of the law.
The World Bank had in November last year warned the Federal Government against financing deficits by borrowing from the CBN through the Ways and Means Advances, saying this was putting fiscal pressures on the country’s expenditures.
Even the CBN said on its website that the Federal Government’s borrowing from it through the Ways and Means Advances could have adverse effects on its monetary policy to the detriment of domestic prices and exchange rates.
“The direct consequence of central banks’ financing of deficits are distortions or surges in the monetary base leading to adverse effects on domestic prices and exchange rates i.e. macroeconomic instability because of excess liquidity that has been injected into the economy,” it said.
Nevertheless, the Senate had approved an upward review of the Ways and Means Advances accessible to the Federal Government from the CBN.
According to the lawmakers, it would enable the Federal Government to meet its immediate and future obligation in the approval of the ways and means by the National Assembly, and advances to the Federal Government by the CBN.
However, some members of the House criticised the process while others protested the unavailability of copies of the amendment bill to keep them abreast of the proposal for which they were summoned to the sitting.
As the House dissolved into Committee of the Whole to consider the report on the bill, with the Deputy Speaker, Ahmed Wase, as the Chairman of the Committee on Water Resources, Sada Soli, raised some questions over the exercise.
