The decision of the Senate to approve Ways and Means advances accessible to the Federal Government from five to 15% has drawn condemnations from finance experts.
According to a report by Daily Trust, experts have argued that the decision would create an avenue for more unsustainable borrowing and also, Increase the debt burden of the country.
According to the CBN Act, Section 38(2) & (3), “Ways and Means shall not exceed five percent of the previous year’s revenue of the Federal Government.”
The FG and the CBN however, have flouted the act as both have gone ahead to access funds more than 5% as stipulated by CBN Act. As of 2022, the CBN Ways and Means advance borrowed by the FG was ₦22.7 trillion.
This has resulted in a sharp increment of Nigeria’s total debt profile which shot up from ₦46 trillion to about ₦70 trillion in 2023. An economist, Dr. Austin Nweze who spoke with the Daily Trust dismissed the Senate’s decision to approve the Ways and Mean limit extension.
The economist argued that the country may, in the long run, fail to honour its obligations by repaying its debt and thus may be overburdened by the overwhelming debt ceiling.
“Borrowing is one thing, capacity to pay back is another. The question is, does Nigeria have the capacity to pay back? Already, children unborn have a debt overhang on their necks.
So if you borrow now, is it to improve their lots or to steal?” Nweze added.
A senior economist at SPM Professionals, Paul Alaje also mentioned that the action has given the incoming administration a free opening to borrow more but on a larger scale.
According to Alaje, “What this entails is that whatever government generated in 2022, it is allowed to borrow 15% of it. As such, for us not to self-medicate like the previous year (2022) when our borrowing instead of 15%, shot up 91%. Thus, the Senate pegged it at 15% which means the potential to borrow will now be up to 15%,”