Tinubu Commits to Strict Adherence to Ways and Means Statutory Limits – Wale Edun

The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, has articulated a commitment by President Tinubu to uphold the statutory limits when seeking budget support facilities from the Central Bank of Nigeria (CBN) through the Ways and Means Advances.

This declaration was made during the ongoing World Bank/International Monetary Fund (IMF) Annual Meetings held in Marrakech, Morocco. Edun underscored the government’s dedication to both the “spirit and the letter” of CBN’s autonomy, ensuring a responsible and transparent approach to fiscal matters.

Nevertheless, Edun revealed that Nigeria is currently engaged in discussions with the World Bank to secure a budget support package totaling 1.5 billion dollars. This move reflects a proactive stance in leveraging international financial partnerships to bolster the nation’s economic stability and development initiatives.

In the words of Mr. Wale Edun, “The World Bank is the foremost development bank that extends support to developing countries for funding their projects and programs. We are pleased to announce that this funding will soon become available, as World Bank financing offers a highly cost-effective solution.”

Climate Financing and Global Concerns

The Minister of Finance also drew attention to the pressing global issue of climate change financing. With an estimated requirement of approximately one trillion dollars worldwide to address the multifaceted challenges of climate change, the need for substantial funding is evident. Edun indicated that there is an existing climate financing fund that offers relatively economical options to support climate change mitigation and adaptation efforts.

Moreover, there is a collective commitment to assist Africa and other developing regions in their transition towards a more sustainable and environmentally responsible future. These regions, despite bearing little responsibility for significant contributions to climate change, often face the most severe consequences. As a result, the Minister expressed the government’s intent to explore various avenues for climate financing, including green bonds and other innovative mechanisms designed to mobilize funds for environmentally friendly projects.

This forward-thinking approach underscores Nigeria’s recognition of the interconnected global challenges posed by climate change and the importance of financial assistance in addressing these issues. By actively pursuing climate financing options, the nation is aligning itself with international efforts to combat the adverse effects of climate change and foster sustainable development.

Background and Fiscal Responsibility

To appreciate the significance of President Tinubu’s commitment to adhering to statutory limits when seeking budget support facilities from the CBN, it is essential to consider the historical context of government borrowing in Nigeria. During the tenure of former President Muhammadu Buhari, there was widespread criticism and concern regarding the substantial debt burden incurred through the utilization of Ways and Means Advances from the apex bank.

Section 38 of the CBN Act outlines the regulations governing the federal government’s borrowing practices. It stipulates that the funds borrowed must not exceed 5% of the previous year’s actual revenue of the government. However, during the previous administration, the loans obtained by the Federal Government under Ways and Means Advances substantially exceeded the previous year’s revenue.

The relevant section of the CBN Act explicitly states, “(1) Notwithstanding the provisions of section 34 (d) of this Act, the Bank Advances may grant temporary advances to the Federal Government in respect of temporary deficiency of budget revenue at such rate of interest as the Bank may determine.”

In the fiscal year 2022, the actual revenue generated by the Federal government amounted to N6.49 trillion, while the Ways and Means Advances utilized stood at N6.2 trillion, representing 138% of the revenue generated in 2021. This imbalance in fiscal management raised concerns among stakeholders and financial experts, as it led to a growing debt burden that exceeded the statutory limits and fiscal prudence expectations.

In light of these developments, President Tinubu’s commitment to adhering to statutory limits when seeking budget support facilities signifies a departure from the fiscal practices of the past and a renewed commitment to fiscal responsibility and transparency. It underscores the government’s intent to manage its finances within the boundaries of established regulations and in a manner that promotes the nation’s economic stability and development. By pursuing responsible fiscal policies and actively engaging with international financial institutions, Nigeria aims to position itself for sustainable growth and development in a challenging global economic landscape.