Nigeria’s Senate Approves Increase in Central Bank Loans to Government
In a move aimed at addressing the country’s budget shortfalls and financial market stability, Nigeria’s Senate has passed a bill to increase the percentage of Ways and Means loans the Central Bank of Nigeria (CBN) can offer to the Federal Government. The upper chamber of the legislature has raised the credit facility from 5% to 10%.
The Ways and Means loan program, also known as the apex bank, provides short-term financing to the Federal Government to cover its budget shortfalls. The Senate amended the CBN Act to increase the total CBN advances (loans) to the Federal Government.
According to Opeyemi Bamidele, the Leader of the Senate, the executive bill aims to enable the Federal Government to meet its immediate and future obligations, given the government’s increasing needs for funds to finance budget deficits and other expenses. The loans will provide immediate funds to address budget shortfalls, finance essential government expenditures, and maintain financial market stability by preventing government default on its obligations.
The loans, when injected into the economy, are expected to stimulate economic activity, potentially create jobs, and enable the government to support critical sectors such as agriculture, healthcare, and infrastructural development. Bamidele also highlighted that the loans will lower the government’s borrowing cost by providing cheaper funds than the traditional borrowing method.
The bill was passed after consideration in the Committee of the Whole, with the Senate arguing that the margin of increase should be from 5 to 10%. Although the increase is necessary for economic development, the Senate emphasized the importance of adequate monitoring of capital projects to ensure that the funds are used for the sole purpose of infrastructure and legacy projects.
President Bola Tinubu is expected to sign the amended bill into law, which will enable the government to access cheaper funds and address its financial challenges.
