- •Borrowing from CBN illegal, suspicious, say NECA, LCCI, economists
•N22.7tn extra-budgetary spending to raise public debts to N69tn
Prominent economists, Nigeria Employers’ Consultative Association and opposition parties took a swipe at the President, Major General Muhammadu Buhari, (retd.), and the Senate over the government’s N22.7tn extra-budgetary spending approved by the upper legislative chamber on Wednesday.
While groups including NECA and the Lagos Chambers of Commerce and Industry questioned the rationale for the loan by a regime that was approaching its exit, economists, in separate interviews with The PUNCH, described the approval by the Senate as unusual.
With the approval by the Senate of the N22.7tn loan from the Central Bank of Nigeria extended to the Federal
Government under its Ways and Means provision, Nigeria’s external debt will rise to N68.95tn.
The Debt Management Office recently revealed that Nigeria’s total public debt stock increased to N46.25tn in the fourth quarter of 2022.
It stated that the figure consisted of the domestic and external total debt stocks of the Federal Government and the sub-national governments (36 state governments and the Federal Capital Territory).
On Wednesday, Senate approved the request of the President for Ways and Means Advances restructuring to the tune of N22.7tn, which then adds to the existing debt stock.
The Ways and Means provision allows the government to borrow from the apex bank if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.
Since the government started experiencing a significant shortfall in revenue, it has relied heavily on the central bank to finance its expenditure programmes via Ways and Means.
The Federal Government had said it would repay the loan with securities such as treasury bills and bonds issuance.
Buhari had last year asked the Senate to approve his proposal to securitize the loan, but the Red Chamber rejected the request, citing a lack of details.
Buhari, while appealing to the Senate to reconsider its stand, said failure to grant the securitization approval would cost the government about N1.8tn in additional interest in 2023.
The Senate Leader, Ibrahim Gobir, who led the Senate in the debate for the approval of the Ways and Means on Wednesday, explained that part of the money was given as loans to states.
Gobir added that the Special Committee was set up by the Red Chamber to scrutinize the fiscal document and put up the report after critical analysis and review of submissions made by the Federal Ministry of Finance, Budget, and National Planning and the CBN.
The Senate Leader said the panel discovered that the Ways and Means balance was initially N19.33tn as of June 30, 2022, but later grew to N22.72tn as of December 19, 2022, as a result of financial obligations to ongoing capital projects and additional expenditures which includes domestic debt service gaps and interest rate.
He noted that the Senate on Wednesday, December 28, 2022, approved the sum of N819.54bn from the N1tn additional request made by the President, leaving an outstanding balance of N180.4bn being the accrued interest on the sum.
Lawmaker justifies borrowing
Gobir further stated that the House of Representatives had earlier approved the additional N1tn Ways and Means Advances requested by the President to enable the smooth implementation of the supplementary budget.
Gobir said, “Part of the Ways and Means money was given to state governments as loans to augment budgetary shortfall in their various States.
“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.
“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.”
The Senate leader added, “The monies received by the Federal Government were used for funding critical projects across the country;
“That due to the serious shortfall in Government Revenue, the Federal Government for the economy not to collapse, was compelled to borrow repeatedly from the CBN, exceeding the 5 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.”
Gobir said the Senate Special Committee, after exhaustive deliberations, recommended, among others, the restructuring of N22.7tn for Ways and Means Advances be approved because the advances were made to ensure that the government does not shut down.
The panel further sought the approval of the Senate for the sum of N180.4bn, being the balance of the supplementary budget and the interest accrued on the Ways and Mean Advances.
Other recommendations were, “If there is a need to exceed the five per cent threshold of the prior year’s revenue, recourse must be made to the National Assembly for approval.
“The Federal Government should begin the process of recovering the portion of the Ways and Means given as the loans to State Governments as further deferment of the repayment of the loans by the States will not be healthy for the economy.
“The Federal Government through the Ministry of Finance, Budget and National Planning should expedite action on the repayment of the loans through treasury bills and bond issuances.
“The National Assembly will not condone future increase in the Ways and Means without seeking the approval of the National Assembly.”
Meanwhile, the Senate President, Ahmad Lawan, after the approval of the fiscal document, noted that the Ways and Means Advances was a global practice.
Lawan added that the Senate had to pass the Ways and Means Advances so that the federal parliament would be able to consider and pass the 2022 Supplementary Budget still pending before the two chambers.
Lawan said, “I don’t see any National Assembly standing against any infrastructure development like the building of roads and bridges among others. It is there
fore very important that before the executive incurred this kind of huge Ways and Means Advances, should, as a matter of must, seek the approval of the National Assembly. Where for, whatever reason, an emergency happened, it should not take them this kind of period before a request is sent to the National Assembly for approval.”
He added, “We have to pass these Ways and Means Advances because we don’t want the government to be shut down. The supplementary budget 2022, is on hold at the moment because we could not pass the Ways and Means request. However, with the passage of the Ways and Means Advances today, the Supplementary budget 2022, which essentially is to rehabilitate damaged roads and bridges across the country, will be fixed.”
NECA flays FG
Reacting to this, the Director General of NECA, Mr Wale Oyerinde, questioned the borrowing, which he said was dragging the economy.
He said, “Our view is this, why are we borrowing again a few days before the expiration of the current administration? What the government should focus more on now is to put a closure to most of the ongoing projects and not borrow again for the incoming government to inherit. Whatever project is not completed at this time, those projects should be part of the handover. And this extended way and means of the CBN are just dragging the economy. The loan is not necessary at this point all attention should be focused on proper handing over so that the next government can start on a good note. We believe that all loans should stop until the incoming government takes over, that is our view, it is not necessary.”
Also speaking, a facilitator with the Nigeria Economic Summit Group, Dr Ikenna Nwaosu, said, “I don’t know why they did what they did, they didn’t give their reasons. I know there has been opposition to that from the private sector; the organised private sector has not been in support of this because it is putting us more into debt. This is towards the end of the President, Major General Muhammed Buhari (Rted) administration. So I can only sit here and be wondering. What is the reason given by the National Assembly for passing that, what are their reasons.”
On his part, a professor of economics, Sherifdeen Tella, berated the Senate for approving the ways and means request without sanctions and warnings adding that it further proves notions of being a rubber stamp assembly.
He said, “The Senate should have sanctioned the Ministry of Finance and the CBN for it because once they start approving, other governments will do the same in the future and even more. It is a legal means of borrowing but it is supposed to be the last resort. It is quite unfortunate that the Senate just approved it like that without warnings and sanctions. It shows they are just rubber-stamp legislature.”
He further warned the incoming administration against this line of action.
“What they should do is stick to the limit because this government has misused that opportunity. Other governments may do the same in the future which is not good enough because ways and means create inflationary pressure on the economy.
“For the incoming administration, it allows them to do the same and worst things which is not good enough for the economy itself. This is unfortunate.”
Also, an economist, Akpan Ekpo, described the situation as “unfortunate” noting, “There is a rule that ways and means should not exceed 5 per cent of previous revenue. To approve that amount in trillions is very unfortunate and I hope it doesn’t encourage future happenings because it has increased our debt which is becoming very disturbing now. We also don’t have enough revenue to match the debt. They must ensure the central bank doesn’t do this again. It is not a welcome development.
“Debt is a generational matter and it is not a good thing. Don’t be surprised the incoming administration will borrow too. I just hope a time won’t come when we are unable to service our debts.”
‘Approval unusual’
The Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said, described the approval as unusual, adding that the total public debt may hit N80tn by the end of 2023.
He said, “This is an unusual approval. The National Assembly was confronted with a fait accompli. Constitutionally, the National Assembly is empowered to appropriate funds before it is spent. But we are dealing with a situation where the monies have been spent before approval is sought. It is really an unusual situation and an aberration, it is a bad precedent.
“The event that led to this situation was a breach of the constitution and a flagrant violation of the CBN Act. It is necessary to officially indict agencies of government involved in these infractions. It is important for state actors to operate within the law at all times. Meanwhile, the public debt levels would be close to N80tn by the end of this year. The incoming administration would have to brace up for the challenges of managing this huge debt.”
A Professor of Management and Accounting at Lead City University, Ibadan, Godwin Oyedokun, criticized the government for its penchant for borrowing.
He said, “This is not the first time they are getting approval for Ways and Means and we have said that naturally, it is adding to their debt profile which some of us have frowned at. If you look at this regime, all they have done is borrow and the implication of this is that they are borrowing for the next generation to pay.
‘It is not as if that when they borrow, we are seeing the effect or impact of what they are borrowing for. With this, it means that the next government is inheriting debt. The debt that they are inheriting, it is the next generation who will pay for it. The future income we are going to generate, somebody already mortgaged it for us to use to pay the debt.
“There is nothing bad in borrowing, it is only when you borrow without sense. Who is bearing the brunt of this borrowing? That is my grouse with this borrowing strategy.”
Also, the Deputy-President of the Lagos Chamber of Commerce and Industry described it as blatantly illegal for the National Assembly to approve spending bills that had not been duly ratified ab initio.
Idahosa said the development shows the level of impunity the Federal Government currently enjoys, which is not tenable in any advanced economy in the world.
He said, “You don’t borrow money that is not in the budget or any supplementary budget to accommodate that borrowing. The only reason they are able to do it is that they have control over the Central Bank.
“It is because we do not have strong institutions that insist on compliance with the law, that’s why this has happened. Because this administration is coming to an end, they did not want to leave an absolute illegality as part of their handing over notes. So, they had to go and get approval for what has been spent, not what is going to be spent.”
Opposition kicks
The Peoples Democratic Party also chided the Nigerian Senate for approving a whopping sum of N22.7tn extra-budgetary spending.
Director of Publicity of the PDP, Chinwe Nnorom said having almost exhausted his tenure, Buhari had nothing more to do than to create more confusion.
On his part, spokesperson for the New Nigeria Peoples Party Presidential Campaign Council in the 2023 election, Ladipo Johnson expressed shock at the development in a conversation with The PUNCH.
He said, “We are shocked at this latest insensitivity by lawmakers who are representatives of the people. What the hell does a government that has a few weeks to round off need such a huge amount of money for,” he asked.
Source: Punch
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