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Tag: Ways and Means

  • Ways and Means: Senate accuses CBN of frustrating investigation

    Ways and Means: Senate accuses CBN of frustrating investigation

    The Senate Ad hoc Committee investigating the N30 trillion Ways and Means facility granted to the federal government has accused the Central Bank of Nigeria  (CBN) of frustrating its efforts to uncover how the loans were utilised.

    The N30 trillion Ways and Means facility was allegedly granted to the federal government between 2015 and 2023.

    The Committee Chairman, Isah Jibrin, made the allegation on Tuesday after receiving an interim report from its consultants.

    Jibrin, the senator for Kogi East, said the CBN has refused to provide the necessary documents to facilitate the investigation, thereby delaying the completion of the assignment.

    Although the representative of the CBN, Malam Hamisu Abdullahi, Director of Banking Services, tried  to say the apex bank provided all the documents requested, the chairman said the facts were different.

    He said: “None of the documents was submitted to us” adding that “as it is, we will not allow you to attend the next meeting because you have been coming here for the same reason.

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    “The least person that will attend the next meeting should be a deputy governor of CBN”.

    Speaking further, Jibrin said “What you are telling us is not the truth. We have not received the documents. I don’t want to deceive the public here”.

    He said the aim of the assignment being entrusted to the committee by the Senate President for them to come up with a report within the shortest possible time was being frustrated by CBN’s action.

    “The information we have here is not different from what we have heard all along.

    “What we did was to hand over the documents to the consultants, and when the consultants made available to us this interim report, our intention was to hold onto the interim report on the final report.

    “We have been compelled to make available this interim report to the general public.

    “This is so that they know that we let them know where the problem is, and the problem is that the CBN has denied us consistently the documents that we need to complete this assignment”.

    NAN reports that the ways and means is a loan facility through which the CBN  finances the federal government’s budget shortfalls.

    This way of financing government deficits usually results in macroeconomic instability, leading to inflation and high exchange rates because of the excess liquidity injected into the economy.

    The CBN law limits advances under ways and means to five per cent of the previous year’s revenue.

    A a way of remedying the situation, the CBN Governor, Olayemi Cardoso, declared in February that the bank would no longer grant ways and means advances to the government “until all outstanding debts are refunded.” 

    (NAN)

  • Reps pass Bill to increase ways and means advances

    Reps pass Bill to increase ways and means advances

    The House of Representatives has passed a Bill for an Act to Amend the Central Bank of Nigeria Act to increase the apex bank’s ways and means advances to the Federal Government from five percent to 10 percent.

    The Bill sponsored by Hon Dr. Wale Ahmed (APC) Agege Federal Constituency, Lagos, passed first, second and third reading during the emergency plenary sitting on Wednesday, July 31.

    Ways and Means Advances are loan facilities used by the CBN to finance the government during periods of temporary budget shortfalls.

    The House had dissolved into Committee of the Whole to consider the report on the bill, with Deputy Speaker, Benjamin Kalu, as the chairman.

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    During the debate, Minority Leader of the House, Kingsley Chinda, opined that the loan limit be reduced to two per cent to ensure accountability and transparency.

    Chairman of the House Committee on Finance, James Faleke, said the present five per cent was inadequate for the government to rely on.

    In his submission, Hon. Isiaka Ayokunle suggested the limit should be increased to 10 per cent.

    This, he said, ensure the managers of the economy serve with caution.

    Former Deputy Speaker, Idris Wase, approved Ayokunle’s suggestion that it should be raised to 10 per cent.

    After the debate, Kalu put the motion amending the bill to reflect 10 per cent to a voice vote.

  • Fed Govt vows to audit N22.7tr Ways and Means

    Fed Govt vows to audit N22.7tr Ways and Means

    The federal government has resolved to audit the N22.7 trillion Ways and Means debt hanging on its neck.

    Minister of Finance and Coordinating Minister for the Economy, Wale Edun made this disclosure at the ongoing Public Wealth Management Conference organized by the Ministry of Finance Incorporated (MoFI)

    Edun: “There was an inherited amount, N22.7 trillion backlogs, we are auditing it, it’s like when I am ready to pay a loan at the bank I audit it I ask for an audit before agreeing on the sum to pay. But apart from that how do you close your ways and means gap, you get your revenue up, you get your expenditure down as much as possible” the finance minister said.

    He noted that the Central Bank of Nigeria (CBN) has advocated for reducing and eventually eliminating the “ways and means” approach, which involves borrowing from the CBN to finance government expenses. To close the gap created by this practice, efforts are being made to increase revenue and reduce expenditure.

    The administration of President Bola Ahmed Tinubu inherited the N22.7 trillion Ways and Means debt from past administrations. From 1999 to May 29, 2023, past governments had accessed the Ways and Means (overdraft from the CBN) to run the government. A substantial portion of the amount is alleged to be spent on paying civil servants’ salaries over the years.

    Regarding revenue sources, Edun highlighted the importance of oil revenue and urged the Nigerian National Petroleum Corporation (NNPC) to increase oil production while cutting costs. Additionally, efforts are being made to improve revenue collection from government-owned enterprises and enhance the efficiency of tax collection through digitization and technology.

    “We have used technology, digitization such that we have laid the foundation for a total revamp of federal government revenues and we expect the revenues to go up from what is due to government at the hands of other companies and enterprises will automatically now be deducted using digitization”.

    Furthermore, the finance minister said there are plans to reform fiscal policies and tax systems to streamline processes, reduce taxes, and eliminate unnecessary levies and fees. This includes the introduction of an emergency intervention bill to rationalize taxes and improve revenue collection from both corporate sectors and individuals.

    According to the minister, “the fiscal policy and tax reform committee is going to revolutionize and it’s going to announce very quickly through an emergency intervention bill, it’s going to rationalize taxes, take more nuisance value away from public sector, it’s going to reduce the tax value you have on a handful of items, all the levies and fees particularly the ones that are directly controlled by the federal will all be removed. On the revenue side, everything is being done to ensure that there are no leakages of revenue.”

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    On the expenditure side, measures are being implemented to reduce inefficiencies, eliminate duplications, and prevent leakages in government spending. This includes addressing issues such as duty waivers, tax incentives, and contract expenditures to ensure that government funds are utilized effectively.

    Wale Edun said: “On the expenses side we are also implementing a robust expenditure framework that removes the leakages, removes the double counting, payment to people who are not supposed to be, whether it is from duty waiver or tax incentives or even expenditure of government on contract supplies etc so that both from the revenue on the debt side, there’s a change that is being implemented and results are already coming through and that is the way that the government will now get itself weaned off the ways and means which have long since played.”

  • Understanding Ways and Means in government financial operations

    Understanding Ways and Means in government financial operations

    By James Olowo

    Recent disclosures from a Special Investigator appointed by President Bola Tinubu have brought attention to the practices of the Central Bank of Nigeria (CBN) and the Ministry of Finance during the previous administration. These revelations have sparked discussions about the use of “Ways and Means” as a crucial financial mechanism employed by governments, a concept that might not be widely understood among the public.

    The leaked memo allegedly authored by the Special Investigator and reported in the media pointed fingers at former government officials, including Zainab Ahmed, the erstwhile Minister of Finance, citing an apparent unaccounted sum of N17.369 trillion. It is important to note that the objective of this article is not primarily to defend these former government officials (as they are more than capable of defending themselves). Instead, it aims to offer perspective and educate the public, particularly in response to a memo segment stating that over N17 trillion could not be accounted for.

    As stated in the memo, “The sum of N17.369 trillion remains unaccounted for, as neither due appropriation nor approvals exist to support the diversion of public funds through this medium. This constitutes an offence under the penal code as applicable in the Federal Capital Territory to which actors and conspirators, in this instance, are liable.”

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    Surprisingly, even those propagating the narrative of an unaccounted N17 trillion might not comprehend that many Nigerians are unfamiliar with the purpose of Way and Means in meeting government financial commitments. A better context for Nigerians would be to unearth the origins of Ways and Means, and how it comes to play here.

    The concept of Ways and Means finds its origins in the 17th-century British parliament, primarily addressing the provision of revenue to meet national expenditure requirements. In Nigeria, it manifests as a tool allowing the federal government to acquire loans from the Central Bank to fulfill financial obligations, especially during revenue shortfalls. It’s crucial to emphasize that such practices are legal and serve the public interest by bridging financial gaps when revenues fall short of budgeted estimates.

    During Nigeria’s economic challenges, particularly significant revenue shortfalls due to declining oil revenues, the government resorted to utilizing Ways and Means regularly. However, it’s important to acknowledge that these actions were governed by Section 38 (2) of the CBN Act, which stipulates limits on such advances, even though the previous administration surpassed this limit, exceeding the prescribed five percent ceiling, with the nation’s Ways and Means escalating from N856 billion to N23.8 trillion in seven years, a 2,635 percent increase.

    It’s essential to understand that this overreach beyond the stipulated five percent can be considered an economic ‘doctrine of necessity’ due to the extraordinary financial strain the country experienced during that period. This exceptional circumstance led to senate discussions and the subsequent passing of a bill to increase the Way and Means benchmark from five percent to 15 percent in 2023. In his lead debate, Senator Ibrahim (Sokoto East-Senate Leader) which was tagged on the Central Bank of Nigeria Act (Amendment) BILL, 2023 (SB. 1125), emphasized the significance of this amendment in empowering the federal government to execute pivotal projects aimed at stimulating and revitalizing the economy. He said, “Mr President, my respected colleagues, permit me to lead the debate on this Bill which seeks to amend the Central Bank of Nigeria (CBN) Act to increase the total CBN advances to the Federal Government from five per cent to a maximum of 15 per cent (15%). The Bill was read for the first time in this Chamber on Wednesday, May 24, 2023. 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.”

    Without this increment in the Way and Means percentage, observers might hastily judge those in charge of the nation’s economy during that period as guilty. However, one must consider the broader context.

    In 2016, Nigeria witnessed its lowest oil revenue, merely earning $17 billion, a stark contrast to previous years. Whereas, in the previous year, it was $24.8billion and $54.55billion in 2014. It was $58billion in 2013 and $62.9billion in 2012. The $N10billion earned in 2016 was the lowest the nation would earn in 10 years. Oil revenue improved the following year 2017 to $37billion but it was still a far cry from what it was in the four years before the Buhari administration came into office.

    When assessing the period in question, it’s crucial to juxtapose Nigeria’s dwindling oil revenues with its governmental expenditures. The economic downturn significantly affected the government’s ability to meet its fiscal targets, leading to reliance on borrowing to finance essential developmental projects in 2016. The implementation of the Treasury Single Account (TSA) policy aimed to curb fund misallocation and corruption within government agencies. Nevertheless, it remained a challenging budget year due to various factors, including disruptions in oil production in the Niger Delta region.

    The 2016 budget was intended to enhance capital expenditure compared to previous years, necessitating a higher projected expenditure than revenue. The budget deficit was anticipated to be financed through borrowing from domestic sources, where the Way and Means came into play. Additionally, the budget aimed to retire maturing loans, a segment appearing under the Debt Service section for the first time.

    This increased allocation for capital expenditure, significantly higher than previous estimates, was designed to align with the government’s objective of diversifying the economy. The focus was on substantial investments in infrastructural development and federal government special intervention programs, reflecting a 900% increase from the 2015 estimates.

    The above elucidation does not isolate the 2016 budget but pays special attention to capital expenditure, projected revenue shortfalls, and the unavoidable need to bridge these gaps. It is noteworthy that Nigerians have consistently lamented the allocation of a significant portion of the budget to recurrent expenditure, highlighting the necessity for change.

    An economist, preferring anonymity, suggested that exploring Way and Means might not have been necessary if the nation could have met recurrent budgetary obligations despite revenue shortfalls. However, this might have excluded allocations to capital expenditure, which typically benefits the general populace.

    It’s important to clarify that the employment of Ways and Means is not tantamount to misappropriation. Funds obtained through this mechanism were directed towards tangible and essential projects. Furthermore, imposing higher taxes, although a potential revenue-generating avenue, was deemed counterproductive during a time when the populace was already financially strained.

    In summary, the application of Ways and Means during that period aimed to mitigate the economic downturn’s effects, support capital projects, and stimulate the micro-economy. It’s imperative to understand the context within which these financial tools were utilized and acknowledge their contribution to sustaining essential public services and infrastructure development.

    • Olowo, a public finance analyst, wrote in from Abuja.