Central Bank of Nigeria Admits Violating Law With N23.1trn Overdraft to FG

The Central Bank of Nigeria (CBN), which published multiple annual financial statements on its website (the first time since 2015), has admitted it violated the CBN Act by extending ₦23.18 trillion in overdraft facilities to the Federal Government of Nigeria.

This exceeded the limit placed on its lending to the government, which is capped by statue at 5% of federal revenue.

“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,” the CBN said.

The International Monetary Fund (IMF) warned on Thursday that the CBN’s continuous lending to the government are causing excess liquidity, depressing interest rates, discouraging savings and deterring the dollar inflows that could boost naira stability after the government allowed its local currency to trade more freely since mid-June.

Nigerian lawmakers early this year raised the limit the central bank can lend to the government to 15% of previous year’s revenue but insisted that the government must in future seek its approval before it can take on such debts.

According to Ibrahim Gobir, then senate leader, the amendment was necessary to “enable the federal government to meet its immediate and future obligation in the approval of the ways and means by the national assembly and advances by the CBN.”

President Bola Tinubu relaxed foreign exchange rules following his May 29 inauguration, suspended the central bank Governor Godwin Emefiele in early June and has since opened a probe into the monetary authority’s activities.