This is coming six months after the CBN governor, Olawale Cardoso vowed the apex bank can no longer advance loans to the federal government through the Ways and Means as Section 38 of the CBN Act (2007) bars it from doing so until previous advances have been paid.

The credit facility known as the Ways and Means, offers short-term financing to the Federal Government to cover its budget shortfalls.

To this end, the Red Chamber amended the CBN Act to increase the total CBN advances (loans) to the Federal Government to 10% from 5%.

The bill for the amendment of the CBN Act was considered at plenary on Wednesday when it was read for the first time.

According to Channels Television, the Leader of the Senate, Opeyemi Bamidele said the executive bill read for the first time on Wednesday is to enable the Federal Government to meet its immediate and future obligations owing to the government’s increasing needs for funds to finance the budget deficits and other expenses.

Bamidele explained that the loans would enable the provision of immediate funds to address budget shortfalls and finance essential government expenditures as well as help maintain financial market stability by preventing government default on its obligation.

He said the loans, when injected into the economy, will stimulate economic activity, potentially create jobs and enable the government to support critical sectors like agriculture, healthcare and infrastructural development.

The Senate leader further added that the loans will lower the government’s borrowing cost by providing cheaper funds than the traditional borrowing method.

The lawmakers argued that the margin of increase should be from 5 to 10 per cent.

They reasoned that although the increase was necessary for economic development, adequate monitoring of capital projects should be enhanced to ensure that the funds are used for the sole purpose of infrastructure and legacy projects.

The executive bill scaled the third reading and was passed after consideration in the Committee of the Whole.

Cardoso had said the apex regulator can no longer advance loans to the federal government through the Ways and Means as Section 38 of the CBN Act (2007) bars it from doing so until previous advances have been paid.

Cardoso spoke while addressing members of the Senate committees on Finance, Appropriation, Banking, Insurance and Other Financial Institutions with the minster of finance, Wale Edun, his counterparts in budget and national planning, and agriculture, Atiku Bagudu and Abubakar Kyari, present.

Cardoso had said: “Increase in Net Foreign Asset following the harmonisation of exchange rates and the N3.22tn Ways and Means advances were the major factors driving the increase in money supply.”

“I am pleased to note the fiscal authorities’ efforts in discontinuing Ways and Means advances. This is also in compliance with Section (38) of the CBN Act (2007), the bank is no longer at liberty to grant further Ways and Means advances to the federal government until the outstanding balance as of December 31, 2023 is fully settled.

“The bank must strictly adhere to the law limiting advances under Ways and Means to five percent of the previous year’s revenue. We have also halted quasi-fiscal measures of over N10tn by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess naira and raising prices to the level of inflation we are grappling with today.”