FG Accuses CBN of Misappropriating N2.73tn in Interest Payments on Ways and Means

The Federal Government has accused the Central Bank of Nigeria (CBN) of misappropriating N2.73 trillion in interest payments related to the Ways and Means facility.

The Federal Government has accused the Central Bank of Nigeria (CBN) of misusing ₦2.73 trillion in interest payments related to the Ways and Means advances.

This revelation brings significant concerns about how the apex bank manages public funds.

The accusation was outlined in the Federal Government’s consolidated financial statement for the year ending December 31, 2021.

The document, presented to the National Assembly by Auditor-General Shaakaar Chira on July 31, 2024, underscores irregularities in managing the temporary loan facility.

According to Platinumpost, Ways and Means is a mechanism used by the CBN to offer short-term loans to the government in order to cover budget deficits. Although it plays an essential role in funding governmental activities, this facility has faced criticism due to concerns over its transparency and potential impact on fiscal discipline.

The Auditor-General’s report indicates that the ₦2.73 trillion misappropriation relates to interest payments on the Ways and Means facility.

The report states that the Federal Government alleged the CBN kept interest charges totaling N2.73tn, using these funds “for its sole benefit” instead of returning them to the Consolidated Revenue Fund.

As of December 31, 2021, the CRF had a negative cash balance of N17.1 trillion, which included N4.4 trillion in Ways and Means advances.

The 1999 Constitution of the Federal Republic of Nigeria (as amended) and the 2009 Financial Regulations explicitly forbid unauthorized withdrawals from the CRF or overdrawing government accounts.

According to Section 80(2) of the Constitution, funds cannot be withdrawn from the CRF unless an appropriation act or a supplementary act has granted approval. Additionally, paragraph 710 of the Financial Regulations prohibits overdrafts and requires that any interest accrued must be reimbursed.

The report, however, indicated that the CRF along with four other ministries, departments, and agencies had overdrawn accounts amounting to N17.1 trillion without proper approvals or documentation to support this figure.

The negative balance of the CRF was comprised of N9.41 trillion for reconciled domestic debt service, N4.45 trillion for Ways and Means withdrawals, and N483.97 billion for Paris Club loan refunds.

Additional components comprised deferred state loan deductions and CPV coupon payments.

The report stated that the CRF had a negative balance of N17,105,111,709,523.00 as of December 31st, 2021. This included an actual Ways and Means advance of N4.4 trillion taken by the government along with interest charged on it for exclusive use by the CBN. It was treated as if this Ways and Means were a loan from CBN funds or any group of syndicated lenders.

In its response, the Federal Government asserted that the CBN had mismanaged the Ways and Means facility by handling it as if it were loans drawn from its balance sheet or a syndicated arrangement with local or foreign lenders.

It claimed that the N2.73 trillion interest charged on these advances was improperly retained by the apex bank and demanded its immediate refund to the CRF.

The report highlighted that the Central Bank of Nigeria (CBN) misused the interest collected on Ways and Means for its own purposes. It emphasized that this facility was neither funded by CBN’s resources or balance sheet nor was it a syndicated loan from local or international lenders.

As of December 31, 2021, the CBN is obligated to return N2.73 trillion in interest that it exclusively utilized to the Federal Government of Nigeria.

The government also directed that, unlike other parts of the overdraft managed by the Debt Management Office, interest charges should not be securitized.

In its assessment, the Office of the Auditor-General asserted that their findings would remain valid unless the Federal Government supplied evidence of appropriate approvals and documentation for the transactions.

The Auditor-General urged the Accountant-General of the Federation to provide an explanation for the N17.1 trillion overdraft to the Public Accounts Committees of the National Assembly and ensure that penalties outlined in paragraph 3106 of the Financial Regulations were enforced for any improper use of public funds.

The audit report identified the irregularities as stemming from deficiencies in the internal control processes at the Office of the Accountant-General of the Federation, characterizing this issue as a major threat to public finance.

It cautioned that financing expenditures without authorization and incurring avoidable interest payments placed unnecessary fiscal burdens on the government.