FG budgets N1.2tn to service CBN loans

The Federal Government of Nigeria has budget plans to spend N1.2tn on servicing the loans it got from the Central Bank of Nigeria.Information Guide Nigeria

According to the 2023 fiscal framework document obtained by PUNCH,  the Federal Government has allocated N6.31tn to service its total debts.

It revealed that the Federal Government allocated approximately N3.3tn to service domestic debts, N1.81tn for foreign debts and N1.2tn for ways and means.

The document also showed that this was the first time the Federal Government was making a budgetary allocation for ways and means.

Ways and Means Advances is a loan facility that is used by the Central Bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.

Section 38 of the CBN Act, 2007, states that the Central 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.JAMB portal

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As reported by PUNCH, 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.”NYSC portal

However, the CBN has said on its website that, “The direct consequence of central banks’ financing of deficits are distortions or surges in the monetary base leading to adverse effects on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy,” it said.JAMB Result

Recall that in November 2021, the World Bank had warned the Nigerian government against financing deficits by borrowing from the apex bank through the Ways and Means Advances.

According to the bank, the government had always under-budgeted for debt service as the government failed to consider the cost of ways and means financing its debt service allocation.

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