By Ayo Yusuf
In the first three months of this year, Q1, the federal government has paid an interest of N912.32bn on the loans it got from the Central Bank of Nigeria through Ways and Means Advances.
The amount is nearly three times the N348.92bn spent in the same quarter last year.
This was revealed in the Q1, 2023 Budget Implementation Report of the Budget Office of the Federation which showed an increase of 161 percent on the amount spent to service loans last year.
There have been speculations that the federal government would spend N1.2tn on servicing the loans it got from the CBN through the Ways and Means Advances, making it an average of about N300bn monthly.
Analysts say at this rate the government will be spending 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 advances beyond the five per cent threshold of the CBN.
