Reps in Emergency Session Amend CBN Act, Increasing FG’s CBN Borrowings from 5 to 15 Percent

According to Vangaurd report, in an emergency session, the Nigerian House of Representatives has passed an amendment to the Central Bank of Nigeria (CBN) Act, granting the federal government the legal authority to request up to 15 percent Ways and Means loans from the CBN. The amendment allows for an increase in the amount of funds that the government can borrow from the central bank, expanding it from the previous limit of 5 percent.

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The amendment to the CBN Act comes at a time when the Nigerian government is grappling with fiscal challenges, exacerbated by the impact of the global pandemic and the need for economic recovery. The increased borrowing limit from the CBN aims to provide additional financial support to the federal government in meeting its obligations and implementing essential developmental projects across the country.

By raising the borrowing limit to 15 percent, the federal government can access more funds from the CBN through the Ways and Means mechanism. Ways and Means loans are short-term borrowings that the government can utilize to bridge temporary gaps in its finances. This amendment equips the government with a tool to address urgent financial needs and support key sectors of the economy.

However, it is important to note that borrowing from the CBN under the Ways and Means framework is expected to be a temporary measure. The government must also exercise prudence in managing its borrowing to ensure the sustainability of the country’s financial system and prevent any adverse effects on the economy in the long term.

The decision to amend the CBN Act and increase the borrowing limit has sparked debates among lawmakers, economists, and stakeholders. Proponents argue that the expanded borrowing capacity will enable the government to address pressing economic challenges, stimulate growth, and fund critical infrastructure projects. They emphasize the necessity of providing the federal government with the necessary tools to effectively navigate the current economic landscape.

Critics, however, express concerns over the potential implications of increased borrowing from the CBN. They caution against excessive reliance on the central bank’s financing, as it could potentially lead to inflationary pressures and weaken the country’s monetary policy framework. Additionally, they call for a comprehensive strategy to address the underlying structural issues affecting the economy and explore alternative sources of funding beyond the central bank.

It is crucial for the federal government to exercise responsible fiscal management, ensuring that the borrowed funds are utilized judiciously and in alignment with national development objectives. Transparent and accountable mechanisms must be in place to monitor the utilization of borrowed funds, preventing any misuse or diversion.

The amendment to the CBN Act and the subsequent increase in the borrowing limit are expected to have significant implications for Nigeria’s fiscal and monetary landscape. As the government seeks to address the country’s economic challenges and promote sustainable development, a balanced and well-coordinated approach is essential to strike the right balance between economic growth, inflation control, and long-term financial stability.

Credit: Vangaurd

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