Senate, on Wednesday at an emergency session, passed a Bill for an Act to amend the Central Bank of Nigeria, CBN Act, to increase the apex bank’s total advances to the Federal Government from 5% to a maximum of 10%.
The Executive Bill, which was sponsored by the Senate Leader, Senator Opeyemi Bamidele (APC Ekiti Central) passed first, second and third reading during the session.
Ways and Means is a loan facility through which the CBN finances Federal Government’s budget shortfalls.
The facility allows the Government to borrow from the bank, if it needs short-term or emergency finance to fund important projects.
The amendment bill initially proposed a borrowing limit of 15%, but several Senators kicked against it, cautioning that the borrowing limit should not exceed 10% in order to ensure fiscal discipline in the system.
Accordingly, during a clause by clause consideration of the Bill, the Senate Minority Leader, Senator Aba Moro (PDP Benue South) moved for an amendment, that the word 15% be substituted for 10% in clause 2.
The motion was supported by majority of the Senators and the proposal was amended and reduced from 15% to 10%.
Also contributing, Senator Abdul Ningi (PDP Bauchi Central), moved for an amendment, suggesting that the borrowing should only be limited to capital expenditure but other lawmakers rejected the idea and the motion was killed as nobody seconded it.
In his lead debate, Senator Bamidele explained that the essence of the Bill was to enable the Federal Government meet its immediate and future obligations due to the government increasing needs for funds to finance the budget deficits and other expenses.
“The Central Bank of Nigeria’s advances to the federal government are essentially loans that the Central Bank of Nigeria provides to the government to help it meet its financial obligations. These Advances are typically short-term and are expected to be repaid by the government,” he said.
He also explained that the advances would provide immediate funds to address budget shortfalls and finance essential government expenditure; help maintain financial market stability by preventing government default on its obligation.
The Senate Leader noted that it would inject money into the economy, thereby stimulating economic activity and potentially creating jobs; enable the government to support critical sectors like agriculture, health care and infrastructural development; and lower the government borrowing cost by providing cheaper funds than the traditional borrowing method.
“This amendment is very consequential and it needs the support of us all This is to enable the Federal Government to embark on very important projects that will inflate and rejig the economy especially the Renewal Hope Infrastructural Development across the country.
“This is the first time that both the executive arm and legislative arm are passing budget that has more capital than recurrent. I therefore, urge you all to support the passage of this Bill,” he said.