A financial economist and renowned professor of capital market at the Nasarawa State University Keffi, Uche Uwaleke, has called on the National Assembly to put in place measures to ensure that the federal government stops abusing the Central Bank of Nigeria (CBN) Act with regard to ‘ways and means.’
Uwalake’s reaction is coming on the heels of the Senate’s approval of President Buhari’s request to restructure the sum of N22.72 trillion Ways and Means advances made to ensure the government was not shut down.
The securitisation of the N22.7 trillion CBN Ways and Means (loan) to the federal government has officially moved the country’s debt stock to N77 trillion at the end of this administration.
The federal government, as a result of revenue shortfalls occasioned by the COVID-19 pandemic and low oil prices, relied heavily on the Ways and Means to finance its budget deficit to keep the country working for the people; the monies received by the government were used for the funding of critical projects across the country.
When the government exceeds its revenue, the CBN finances the deficit through Ways and Means Advances, subject (in some cases) to the limits set by existing regulations, which are sometimes disregarded by the government.
The direct consequence of the CBNs’ financing of deficits is distortions or surges in the monetary base, leading to adverse effects on domestic prices and exchange rates, i.e macroeconomic instability, because of the excess liquidity that has been injected into the economy.
Uwalake, who spoke exclusively to the Daily Trust, said: “What we have seen from the Senate is a way of saying, what has happened has happened, let us move forward.
“But going forward, we must put in place measures to ensure the CBN Act is strictly followed, and it stipulates not more than 5 per cent of government revenue of the previous year to be repaid within the year.”
He also said the CBN account should be audited as and when due and made public because the process is in arrears and so the National Assembly could not have stopped the borrowings.
He said the auditor general of the federation should be empowered to audit the CBN and the outcome should be acted upon by the Senate so that once a breach is found, the Senate can stop further release.
He further suggested that the Debt Management Office should not be the agency setting debt limit as it is an appendage of the fiscal authorities. “They can be forced to adjust the limit. It used to be 25 per cent, now it is 40 per cent.”
He said the Fiscal Responsibility Commission (FRC) should also be made to set debt limits externally to ensure checks and balances.
Another economist, Dr Boniface Chizea, explained that the government does not have a better alternative.
Chizea disclosed that Nigeria’s economy might become chaotic if the ‘Ways and Means’ request was not approved.
He said: “It is better you do it than not to pay workers’ salaries and to ruin the nation. It is a means to put money in the hands of Nigerians for spending.
“The Ways and Means represents advances or funds from CBN to the federal government for emergency funding of delayed receipt of fiscal deficit.”
The Senate President, Ahmed Lawan, while speaking after the approval, warned the government that the National Assembly would not condone future increases in Ways and Means without seeking the approval of the legislature.