Has FG Increased Or Exited ‘Ways and Means?’ -By Kashim Jibrin

When one thought controversies surrounding the Central Bank of Nigeria’s loans called Ways and Means given to the federal government were clearing up they seemed to be increasing. In fact, as we hear of clarifications offered by the FG on the matter so do the grey areas appear to increase, confusing the average Nigerian. As such each of us can ask: Has the FG stopped collecting Ways and Means or it has just increased its chances of collecting more when it needs it? This has become a relevant question to ask considering the latest reports in the public space.

For instance, since the beginning of this year reports are that the CBN vows to not give Ways and Means to the FG, and that the FG itself has said it won’t collect. Shortly after, FG said it had settled part of the Ways and Means, that it was settling every loan related to Ways and Means. Later it was reported that some Nigerians sued the FG, asking that it should not be permitted to securitize any loans it collected from the CBN, a case that was thrown out for lack of merit.  On July 25, 2024, The PUNCH newspaper reported that the Minister of Finance, Mr. Wale Edun, said the Federal Government had exited from the Ways and Means borrowing mechanism. He reportedly said this during the half-year review Ministerial Press Briefing with the theme: Economic Recovery and Growth: Progress and Prospects 2024.

Again on August 4, 2024, The PUNCH newspaper reported that the Central Bank of Nigeria might print or wire over N746bn as a loan to the Federal Government based on the Ways and Means provision of the CBN Act. This report followed an occurrence in the National Assembly. All that The PUNCH did in its report was estimate the actual sum any further percentage increase in loans issued to the FG would be. What transpired in the lawmaking chamber perhaps requires to be presented here at some length. This is for the purpose of indicating to the reader what the CBN and the FG may be up to in spite of the announcement that the FG has exited Ways and Means.

There’s an Act that guides how the CBN gives loans to the FG. In the Act, fund that the apex bank should provide to the FG through Ways and Means is five per cent of the FG’s previous year’s revenue. The Act actually states that, “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.” But in the course of debate over Ways and means late July, lawmakers raised the maximum borrowing percentage to ten per cent of the previous year’s actual revenue of the FG.

This is significant to note because in the Senate, increase in the threshold was achieved through a bill sponsored by the Senate Leader, Senator Opeyemi Bamidele, a member of the ruling party. In his lead debate, Bamidele explained that the bill aimed to help the government meet its immediate and future obligations due to the increasing need for funds to finance budget deficits and other expenses. As Bamidele stated, “the Central Bank of Nigeria’s advances to the Federal Government are essentially loans that the Central Bank of Nigeria provides to the government to help it meet its financial obligations. These advances are typically short-term and are expected to be repaid by the government.”

It’s worth noting that the initial suggestion made by Bamidele wasn’t ten percent but fifteen percent hike. Why? Bamidele explained that the request to increase the threshold from five per cent to fifteen per cent of the previous year’s revenue was made to provide immediate funds to address budget shortfalls. It was also to finance essential government expenditures, maintain financial market stability, inject money into the economy, support critical sectors like agriculture, healthcare, and infrastructure development. He said this would also lower government borrowing costs compared to traditional borrowing methods.

During the debate, it’s equally interesting that many senators supported the amendment to the CBN Act but argued that the 15 per cent should be reduced to ten per cent. Why? Did they suspect that FG would need the CBN loans based on the current economic realities. However, Nigerians knew that the FG had in the past taken so much Ways and Means loans already and had yet to pay. From 2014 to 2023, the FG was such in dire need that it was compelled to collect over twenty trillion naira through Ways and Means from the CBN.  Based on the latest hike in loan percentage that can be taken, it’s obvious the CBN will have to print more cash to meet the demands for increased funds and this can further raise inflation.

Many Nigerians have been commenting that what transpires in the National Assembly gives room for suspicion. It’s clear there’s a gap between the claim made by the FG that it has exited and the effort made by lawmakers to increase how much of CBN loan the FG can take. If FG won’t take more loans why increase the percentage?  is one logical question any of us will ask. Why didn’t lawmakers leave the CBN Act as it was, at 5 percent?

The picture emerging from the hike also indicates that while the FG has yet to clear its debt Nigerians can only assume it’s preparing to take more loans from the CBN. This is concerning because the CBN loans come at high interest rate, meaning the FG, and by extension Nigerians, are punished for resorting to CBN loans in the first place. The loans are strictly for when the budget has a deficit. FG’s budgets have been having deficits for as long as we can remember. It was in 2014 that the FG first resorted to CBN loans, citing low revenue. That same situation has yet to change ten years after, and with the  many economic challenges facing the nation at the moment it doesn’t appear it’ll go soonest.

For instance, the budget for this year is in deficit. All the means by which the FG can generate more revenues don’t look too positive as things stand. The FG has been taking loans from other sources internally and externally. Many of these loans target specific projects such as infrastructural development. In years past, even with those loans, governments at all levels didn’t have funds for workers’ salaries, meet the basic needs of government, and keep the engine of government running. Ways and Means had been the way out. With low revenue this picture remains the same. So, is the FG expecting to take more loans from the CBN even as it says it has exited the loans?

One knows the FG has challenges so as Nigerians we cannot say the FG should not adopt the solutions available. The concern is that we need to expend loans taken judiciously. And we need to improve other means of generating revenues that have been down at the moment. CBN loans aren’t the permanent way out. But increasing the percentage FG can take from the CBN as lawmakers have done can only get one more concerned that we may be laid back about exploring other options, as well as exit the loans.