Senate Hurriedly Approves Bill To Increase Central Bank’s Ways And Means Lending To FG

Confidence UbaniJuly 31, 20241 Mins read213

The Nigerian Senate and House of Representatives have passed a bill to raise the borrowing limit for the Central Bank of Nigeria (CBN) under the Ways and Means facility. The bill was read for the first time and passed during a plenary session in the upper chamber on Wednesday.

The Ways and Means provision allows the CBN to provide short-term financing to the Federal Government. It is governed by Section 38 of the CBN Act, which states that the funds the federal government can borrow must not exceed 5 per cent of the previous year’s actual revenue. The recent bill, which amends the CBN Act, increases the percentage of federal revenue that can be borrowed from 5 per cent to 10 per cent. This makes it possible for the federal government to have access to more money funds.

Senate Leader Opeyemi Bamidele, who introduced the executive bill on Wednesday, stated:

“The loans will provide immediate funds to address budget shortfalls, finance essential government expenditures, and help maintain financial market stability by preventing the government from defaulting on its obligations”.

The Senate leader argued that the loans would lower the government’s borrowing costs compared to traditional borrowing methods.

However, some lawmakers expressed concerns about the potential misuse of funds under the Ways and Means scheme. They pointed out the need for adequate monitoring of capital projects to ensure that the borrowed funds are used exclusively for infrastructure and legacy projects.

The Ways and Means facility provided by the CBN to the Federal Government has been controversial due to concerns over misappropriation of funds in the past. This issue has made the recent bill a highly contentious one.

Despite the potential challenges, the Senate passed the bill and subsequently scaled the third reading. The House of Representatives also approved the amendment to the CBN Act. President Bola Tinubu is anticipated to sign the amended bill into law in the coming weeks.