The Federal Government paid an interest of N912.32bn in the first quarter of 2023 on the loans it got from the Central Bank of Nigeria (CBN) through Ways and Means Advances, according to findings by The Tide’s source.
This amount was stated in the Q1, 2023 Budget Implementation Report by the Budget Office of the Federation.
The amount spent paying interest on this loan is 161.47 per cent higher than the N348.92 billion spent in the same quarter of 2022.
The source had earlier reported that the Federal Government planned to spend N1.2 trillion on servicing the loans it got from the CBN through the Ways and Means Advances, meaning that the government planned to spend about N300bn quarterly.
However, it had spent about 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 CBN to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.
Section 38 of the CBN Act, 2007 gives the apex bank power to 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.
According to the Act, “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”.
It placed a limit of five per cent on how much the Federal Government could borrow, although the previous administration severely violated the limit.
The House of Representatives of the 9th National Assembly, however, 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 WMAs beyond the five per cent threshold of the CBN.