The Senate on Tuesday resolved to probe how the N30tn Ways and Means loans of the Central Bank of Nigeria was obtained and spent by the administration of former President Muhammadu Buhari.
The development came as a biting food crisis, rising inflation, naira depreciation and worsening insecurity continue to take a toll on Nigerians.
Tinubu’s cabinet members have continued to argue that the current crises were exacerbated by the gross mismanagement of the Buhari administration, arguing that the current reforms were meant to right the wrongs of the past administration.
For starters, “ways and means” in the Nigerian context occurs when the federal government obtains loans from the Central Bank of Nigeria (CBN). The federal government is allowed to borrow from the apex bank through “ways and means” to meet short-term needs or emergencies. This explains why the CBN is known as the “lender of last resort.”
The Senate stated that the reckless spending of the overdraft collected from the CBN under Godwin Emefiele largely accounted for the food and security crises the country was currently facing.
The red chamber then resolved to set up an ad hoc committee to investigate what the N30 trillion overdraft was spent on by the government, noting that the details of the spending were deliberately not made available to the National Assembly.
The latest move by the Senate is expected to unravel the ways the country and its resources were allegedly mismanaged by the Buhari administration.
Buhari had in a letter to the National Assembly in January 2023 requested that the N22.7 trillion Ways and Means loan be converted to a 40-year bond with a moratorium of three years.
Following the request, the House of Representatives on May 4, 2023, approved the conversion of the N23.7trn loan to a long-term bond for 40 years at the rate of nine per cent per annum.
Meanwhile, criticisms have also trailed the approval for the securitisation of additional N7.3 trillion granted to President Bola Tinubu by the National Assembly at the close of 2023.
The securitization means that the federal government (FG) will issue bonds and begin to use funds from the budget to repay the ways and means loan.
Analysts have consistently alleged that former President Buhari abused the ways and means advances and allegedly violated the CBN Act.
Section 38 (2) of the CBN Act makes it clear 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.”
However, the administration overshot the five per cent ceiling and grew ways and means from N856 billion to N23.8 trillion, representing 2,635 per cent in seven years.
In 2017, actual revenue was N2.7 trillion but ways and means stood at N1.1 trillion, representing 37.2 per cent of the previous year’s revenue (N2.95 trillion). This is against the spirit of Section 38(2) of the CBN Act.
In the following year, 2018, actual revenue stood at N3.87 trillion whereas ways and means was estimated at N2.1 trillion.
Given the scenario, the Buhari administration should not have taken more than N135 billion ways and means, which was five per cent of N2.7 trillion revenue realised in 2017. However, it took ways and means that was 77.8 per cent of the previous year’s revenue.
In 2019, actual revenue was N4.12 trillion while ways and means stood at N3.3 trillion, indicating 85.27 per cent of the 2018 revenue.
In 2020, actual revenue was N4.04 trillion, with ways and means standing at N4.4 trillion, representing 107 per cent of the previous year’s revenue, meaning that Buhari borrowed seven per cent more than the revenue realised in 2019 from the CBN.
In 2021, actual revenue was N4.64 trillion while ways and means was N4.3 trillion, representing 106.4 per cent of the 2020 revenue. In 2022, actual revenue was N6,49 trillion whereas ways and means advances stood at N6.4 trillion, representing 138 per cent of the 2021 revenue.
Implications for ordinary Nigerians
Analysts say there are several implications of this. First, it is a violation of the Nigerian laws, which must not be condoned. It means the federal government or any president in power can violate the laws and get away with it.
They also noted that ways and means increases inflation by raising liquidity in the money or capital market: Money market is a market where short-term instruments are traded. Examples of such instruments are treasury bills and mutual funds. On the other hand, the capital market is a market dealing with long-term instruments such as bonds. It also means a market where bonds and stocks are traded.
By securitising ways and means, rather than pay back to the CBN, the federal government simply puts too much money in the money or capital market. For instance, when you advertise a bond of N11 trillion value, investors will trade them – pay for them. This naturally increases liquidity in the economy.
It makes more money available in the economy, thereby fuelling inflation. The World Bank has also accentuated this position, stressing that “between 2020 and 2021, inflation left about eight million more Nigerians below the poverty line by increasing the total number of poor people to about 90 million.”
In other words, the CBN is part of the party that has worsened inflation in Nigeria in the last six years. The ordinary man in the street feels the pains of rising inflation rates in the form of high cost of living.
Also, it increases Nigeria’s debt servicing burden because each loan taken must be repaid with interest – however low. This leaves little resources for infrastructure and development programmes that will benefit the common man.
Senate must address illegal printing of N23tr
A Financial Analyst and Certified Financial Education Instructor, Kalu Aja, in his reaction, said; “The Senate has finally realised that they must address the illegal printing of N23 trillion by the CBN and subsequently hand over of N23 trillion to the past administration of President Buhari.
“The Senate illegally approved the spending of N23 trillion after it had already been spent. According to Senator Ndume, only N819 billion was approved. However, N23 trillion was printed by the Central Bank of Nigeria and handed over to the FGN to spend on No records, No details of expenses, Nothing!
“The dollar equivalent of $50 billion was printed, FIFTY BILLION USD, with no records or details of where it was spent.”
He argued that everyone involved must give an account. “These folks must testify under oath how N23 trillion was approved and spent. 1. The former president, Buhari; 2. The former CBN governor, Godwin Emefiele; 3. The former Minister of Finance, Zainab Shamsuna Ahmed; 4. The current DMO DG Patricia Oniha; 5. The past Senate president, Ahmed Lawan; 6. The past Speaker Femi Gbajabiamila.”
Also speaking on the development, President of the Nigeria Economic Society (NES), Prof. Adeola Adenikinju, said, “Those who designed the ways and means as a source of budgetary support for the federal government did it with a noble objective which is to provide a limited short term budgetary support for the government.
“But it is obvious that in the last couple of years, from the revelation we have heard, that both the government and central bank have abused that privilege as it were.
“To resolve the problem, and provide for a clean sheet, the National Assembly, in the closing years of the last administration passed a law to securitise the Ways & Means and to move the maximum amount of support the CBN could provide through the Ways & Means to about 15% from the 5% in the CBN Act of 2007.
“Once the government starts violating this, there will be problems. The rise in inflation that we have experienced is due to expansionary money supply coming via increased credit to the federal government. This had also neutralised the efficacy of the contractionary monetary policies, characterised by the rise in the Monetary Policy Rate, MPR, and other monetary policy parameters under the last CBN management,” he said. (Daily Trust)
