CBN finally admits breaking law with N23 trillion loan to Buhari govt

The Central Bank of Nigeria (CBN) has admitted for the first time it broke the law by advancing N23.2 trillion to the Buhari government, far above what the law permits.

The bank said if it abided by the CBN Act, it would have loaned the federal government ₦252.272 billion. But the bank said it gave N23.18 trillion.

“As at 31 December 2022, the Bank had advanced a total of ₦23.18 trillion to the Federal Government which exceeded the statutory limit by ₦22.9 trillion,” it said in its 2022 financial report.

The report was amongst the bank’s financial statements for seven years published for the first time on Wednesday.

One analyst said the reports revealed “discomforting” details about the bank’s management under ousted governor Godwin Emefiele, including a $7.5 billion loan from U.S. banks Goldman Sachs and JP Morgan.

“The central bank’s annual report is discomforting and confirms why the unification of the exchange rates and adjustments of yields on treasury bills did not attract the volumes required to settle FX backlogs,” said economist Kelvin Emmanuel quoted by Reuters.

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– Ways and Means

The law allows the central bank to provide temporary financing to the federal government, capped at 5% of the previous year’s actual revenue. It demands repayment of the so-called Ways and Means within the same financial year.

But the bank’s overdraft to the Buhari administration rose cumulatively by 2900% from N789.7 billion in 2015 when Mr Buhari came into office.

For context, between December 2012 and May 2015, the advances increased by N655 billion, but between January and October 2022 alone, it rose by N5.6 trillion.

In November, the International Monetary Fund warned that the CBN’s continued financing of government’s deficit complicated efforts to contain inflation.

A former governor of the CBN, Sanusi Lamido, said in 2016 that the central bank’s loans to the government was “a clear violation of the Central Bank Act of 2007 (Section 38.2) which caps advances to the FGN at 5 percent of last year’s revenues.”

In 2017, Doyin Salami, a member of the bank’s monetary policy committee, criticised the CBN’s “massive injections of cash” into the economy, and accused it of serving as a “piggy bank” for the government.

– No response

The central bank led by Godwin Emefiele never responded to inquiries on the legal implications of the handouts to the government when contacted during previous reporting.

Instead, as the former administration wound down, Mr Buhari made an attempt in December to obtain a delayed approval for the loan. Senators stonewalled and accused the president of violating the law. They demanded details of how the money was spent.

A report by a senate panel later claimed the money was used to support state governments and fund operations of the federal government.

The senators later agreed to convert the loans to a 40-year debt at 9% interest. The Senate went further by increasing what the CBN can give the federal government from 5% to 15% of the previous year’s actual revenue.

– Breaking the law

In its reporting of the violation, the CBN wrote in its 2022 report: “Non-compliance with Laws and Regulation (Central Bank of Nigeria Act 2007).”

“The temporary advance balance of ₦23.18 trillion is an overdraft facility granted by the CBN to the Federal Government of Nigeria.

“Section 38 of the CBN Act limits the advance that the Bank can grant to the Federal Government of Nigeria (FGN) in any year to 5% of the actual FGN revenue in the preceding year. For the year ended 31 December 2021, the FGN recorded a total revenue of ₦5.045 trillion and 5% of the fiscal year revenue amounts to a statutory limit of ₦252.272 billion.

“As at 31 December 2022, the Bank had advanced a total of ₦23.18 trillion to the Federal Government which exceeded the statutory limit by ₦22.9 trillion.”