Nigerians expressed varied reactions over the war between the Federal Government and former Central bank of Nigeria governor and Emir of Kano, Alhaji Sanusi Lamido Sanusi on management of the economy.
Sanusi had, while speaking in Abuja at a policy monitoring dialogue, had accused the CBN of lending to the Federal Government above the limits stipulated by the CBN Act of 2007.
He stated that CBN’s lending to the government since President Muhammadu Buhari came to office had spiked from about N1.5 trillion to over N4.5 trillion.
“CBN claims on the FGN now tops N4.7 trillion, equal to almost 50 per cent of the FGN’s total domestic debt. This is a clear violation of the Central Bank Act of 2007 (Section 38.2), which caps advances to the FGN at five per cent of last year’s revenues. Has CBN become the government’s lender of last or first resort?”
Sanusi said the country was enmeshed in heavy debts, stating that out of every N1 Nigeria makes, 40 kobo goes to debt and 60 kobo is left for salaries, health, education, power, infrastructure.
Responding, the Presidency on Saturday said the Emir of Kano did not have the facts on the issues over which he criticised President Buhari’s administration.
It also said that $30 billion loan, which the government was seeking approval, was for the building of massive social infrastructure.
Reacting through the Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu, the presidency admitted that the Federal Government had made withdrawals from the account, but not the volume of N4.5 trillion as Sanusi alleged.
“The overdraw does not exceed 1.5 trillion. It is incorrect to say, as he did, that the account was overdrawn by 4.5 trillion. But even assuming that he was correct, this is a government that has money in excess of the amount in the Treasury Single Account (TSA),” he said.
Commenting on this, Mr. Johnson Chukwu, Managing Director of Cowries Asset Management Company Ltd, described the government’s defence as fallacy.
“The Federal Government has admitted that it has overdrawn its position with the CBN. However, I wish to emphasise that the comments that the Federal Government made that it has the TSA balances more than the amount it has overdrawn is fallacious. It is a fallacy because the balances held by the CBN are those that belong to different Ministries, Department and Agencies. Some of them are self-accounting agencies (MDAs). And the amount cannot be used to offset the borrowings by the Federal Government and the states on recurrent expenditure.
“The reality is that the Federal Government has overdrawn its position. And my concern is also that what the Central Bank is doing is that it is shutting out liquidity to the private sector because of the public sector, and, therefore, stifling economic recovery. The appropriate thing is, let’s focus on how to reflate the private sector instead of pumping the entire industry base into the public sector. If we want to recover from the recession, it will not be lending to the public sector, but instead, lending to the private sector.”
He said there was need to review the government’s policy direction in respect of channeling liquidity to the economy.
In his comments, former deputy governor of CBN, Dr. Obadiah Mailafia, said the Federal Government could borrow from CBN, although the apex bank should keep its minimum.
“The principle is that the CBN should be kept to their minimum. That is what IMF convention detects. And we are all members of IMF. Nigeria is a member and many other countries. And for the sake of sound public finance, they have said it should be kept to a minimum because the Central Bank of a country is not a bank of first resort. It is a bank of last resort. So, if we keep on borrowing and borrowing from the CBN, it defeats the purpose of sound fiscal management.
“This is not to say that under extra-ordinary circumstances, the government should not borrow from the CBN. It can. But that should be kept to a minimum. I was there in that roundtable held at the behest of the Savannah Centre chaired by Professor Ibrahim Gambari, former Foreign Minister and former Secretary General to the UN. He gave some figures. In fact, I am in no position to confirm these figures. It is up to CBN to confirm whether the figures he gave was N4.67 trillion. Whether these figures are correct or not, I am in no position to confirm the exactitude of those figures. The figures sound a little bit too high, as far as I know.”
The former CBN deputy governor, however, wondered why Nigerians are harping on just one thing Sanusi said. He also took exception to the way the economic team conducts business and recommended an overhaul of the team.
He expressed misgivings about the $30 billion borrowing, saying that he was not even sure if anybody could lend Nigeria that magnitude.
“Even if they could, we should not take it. I was in that place, and I respectfully disagreed with my former boss. This economy has a huge financing gap, especially on infrastructure. I am not in favour of random borrowing for the sake of borrowing. For example, when we borrowed $I.2 billion to fund rehabilitation in the North East, I am not in favour of that at all. If we fought this tragic civil war that we fought with Awolowo as finance minister and we did not borrow a penny outside to execute the whole war process and including the remarkable rehabilitation and reconstruction of the North East, why is it? I am against borrowing for consumption,” he said.
Also, a development economist, Mr Odilim Enwegbara, accused the CBN of violating the fiscal management rule.
“It is true that Emefiele has since opened the vault of the CBN for the Federal Government, the same way he handed the key to the vault to Jonathan people in an effort to help them win the 2015 presidential election. No one knows whether he has turned the CBN into a development bank. We should be worried because no one knows who approves all the money CBN spends in its interventions in agriculture, in SMEs, etc.
“Little wonder auditors unable to reconcile the large gap between CBN’s 2015 revenues and expenditures, only came to the conclusion that the only way to justify such huge expenditures in 2015 was that the money was simply printed. If it’s true, who authorised the printing and how much was printed?”