In apparent response to an exclusive report by PREMIUM TIMES, the
Governor of the Central Bank of Nigeria, Godwin Emefiele, on Tuesday
scrambled to defend his bank’s huge funding of the federal government.
It had been reported on Monday that CBN was
massively financing the federal government in clear contravention of
the bank’s own rules.
In his explanation, Mr. Emefiele claimed the CBN was not
overfunding the federal government. He, however, did not provide
statistical backing for his claim.
He simply said, “On over-funding of the federal government, let me
state categorically that the CBN has not over-funded the federal
government.
“The government had, on its own, decided that all its funds in banks,
both local and foreign currencies, should be moved into the TSA at the
CBN.
“If a customer of a bank has fixed deposits in an account and needs
some spontaneous financing to meet his obligations, his commercial bank
can allow him overdraw his account temporarily. That is what is
happening.”
Analysis of the CBN’s governor’s claims indicate
that Mr. Emefiele failed to address the major crux of the story — that
of overshooting the lending threshold allowed by the CBN Act and the
illegality of the bank’s action.
From December 2016, according to a member of the bank’s Monetary
Policy Committee, Adedoyin Salami, the CBN has variously made cash
available to the federal government running into trillions, mostly
beyond legal thresholds.
He said the CBN’s claims on the federal government under the period
amounts to N814billion, which is “twentyfold higher” than what the law
allows.
Ironically, the claim of commercial banks, he said, “rose marginally by 0.4% to N4.6 trillion”.
Another route through which the CBN pumped money to the government,
Mr. Salami said, was via the bank’s N454 billion spending on purchase of
government’s treasury bills, which he said, rose by 30 percent.
The government’s overdrafts from the apex bank also rose to N2.8
trillion within the period, representing a five percent increase. But the sharpest rise in the figures, according to Mr. Salami, was in
the government’s “mirror account” liabilities, which rose “from N3
billion at the end of 2016 to N1.5 trillion in April 2017”.
Authorities at the CBN are yet to contradict Mr. Salami’s figures.
A look at the CBN Act 2007 show that the huge direct financing of the federal government is in contravention of the law.
Although Section 38 (1) of the Act empowers the bank to grant
“temporary advances to the Federal Government in respect of temporary
deficiency of budget revenue” subsection 2 of the same section
stipulates that “the 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”.
Additionally, subsection three of the section provides that such
advances should be paid “as soon as possible and shall in any event be
repayable by the end of the Federal Government 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”.
By the estimated N6 trillion earned by the government last year, the
CBN should have only granted advances to the federal government not
exceeding N300 billion, representing five percent of the earnings.
But in his rationalisation of his bank’s actions, Mr. Emefiele failed
to explain why the CBN exceeded the lending threshold allowed by the
law. He also failed to explain why a fleeting, operational account such as
the Treasury Single Account would be a basis to lend to government
beyond legal limit.
A former governor of the CBN and an ex-deputy governor of the bank
had described the apex bank’s action as “reckless and illegal”.
They argued that that kind of monetary policy could only set the Nigerian economy up for a big fall.
