Lawmakers, professionals lambast Buhari, Emefiele over CBN loans

The Federal Government’s attempt to securitise the Ways and Means Advances is a continued breach of the Central Bank Act of 2007, according to some lawmakers, lawyers and economists.

The Ways and Means Advances are a loan facility through which the CBN finances the shortfalls in the government’s budget.

According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government regarding temporary deficiency of budget revenue at such rate of interest as the bank may determine.

Section 38of the Act read in part, “(1) …the Bank may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate of interest as the Bank may determine. (2) 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.

(3) All Advances made pursuant to this section shall be repaid — (a) as soon as possible and shall in any event be repayable by the end of the Federal Government’s financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the Bank to grant such further advances in any subsequent years shall not be exercisable, unless the outstanding advances have been repaid;

“and (b) in such form as the Bank may determine provided that no repayment shall take the form of a promissory note or such other promise to pay at a future date or securitisation by way of issuance of treasury bills, bonds, certificates or other forms of security, which is required to be underwritten by the Bank.”

The continued lending to the Federal Government by the CBN despite not liquidating previous advances, according to the lawmakers, lawyers and economists, is unlawful as both the government and the apex bank have been in breach of Section 38(2), (3a) of the Act, while the current securitisation proposal will breach of Section 38(3b) of the law.

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