On Wednesday, the Senate and the House of Representatives approved a bill that lets the Central Bank of Nigeria (CBN) offer more loans to the Federal Government.
The Senate increased the loan limit from 5% of the government’s revenue to 10% in a year.
This move allows the Central Bank to help the government quickly when there is not enough money to cover its budget.
Changing the CBN Law
The Senate changed the law so the Central Bank can lend more money to the Federal Government.
Senate Leader Opeyemi Bamidele explained that the bill would allow the government to meet its financial needs now and in the future as they need more funds to cover budget deficits and other essential expenses.
He said these loans would help with budget shortfalls, support necessary government spending, and help keep the financial market stable by stopping the government from not paying its debts.
Opeyemi and other senators agreed that increasing the loan limit from 5% to 10% is needed for economic growth, but they also said there should be strict monitoring to make sure the money is used only for important projects.
After discussing it fully, the Senate passed the bill on its third reading.
The House of Representatives also agreed to change the law to increase the loan limit from 5% to 10%.
President Bola Tinubu is expected to sign the bill into law soon.
Important Things to Know
In the past, there have been issues with how the Ways and Means advances were used, making this bill controversial.
Back in May 2023, just before President Buhari left office, the Senate agreed to restructure N22.7 trillion in loans from the Central Bank to the Federal Government.
Many experts criticized former President Buhari for increasing the country’s debt by taking over N22.7 trillion from the Central Bank.
According to Section 38 of the CBN Act, the government can only borrow up to 5% of the previous year’s revenue. However, the government borrowed more than it was supposed to.
The law states, “The Bank can give temporary loans to the Federal Government for shortfalls in budget revenue at an interest rate decided by the Bank.”
For example, in 2022, the Federal Government made N6.49 trillion, but took N6.2 trillion in loans.