The Central Bank of Nigeria (CBN) on Wednesday reacted to the BusinessDay report on Monday, saying the Treasury Single Account (TSA) covers the overdraft to the Federal Government.
BusinessDay on Monday, June 17, 2019, published a report with the headline “CBN’s life support to FG rises 780 percent to N8.12trn in 4yrs”.
But the CBN, in a statement signed by Isaac Okorafor, its director of corporate communications, said BusinessDay had restricted its report only to CBN’s claims on the Federal Government while ignoring other numerous deposits of the Federal Government, including those of the Treasury Single Account (TSA), with the CBN.
According to the statement, when the claims of the FG on CBN are netted against the claims of the CBN on the FG, the resulting net positions indicate that the FG was actually the net creditor to CBN in 2014, 2015 and 2017 to the tune of N2.14 trillion, N1.65 trillion and N0.36 trillion, respectively. On the other hand, CBN was the net creditor to the FG in 2016 and 2018 to the tune of N0.11 trillion and N0.34 trillion, respectively.
The CBN said it was clearly inappropriate to compare the position as at end-2018 with the position as at end-2014, ignoring the movements within the period.
“We wish therefore to reassure the investing community and the general public that the CBN remains faithful to its statutory mandate as banker and financial adviser to the Federal Government,” the statement said.
Notwithstanding the CBN’s clarification, however, it is worthy of note that the surge in net credit – that is, the difference between the amount the CBN lent to the Federal Government and the amount which the FG has as deposit with the bank – to N342.2 billion was as a result of a sporadic increase in the bank’s claim to the Federal Government.
Data from the CBN showed that the amount of money borrowed by FG from the bank between 2014 and 2018 rose by 780 percent while the amount deposited in the CBN’s custody by the Federal Government rose by 154 percent.
The data further explained that since the year 2009 through 2015, the net deposit of the Federal Government – that is, the difference between the money the FG deposits with the CBN and the amount borrowed by the FG from the bank – averaged about N2.8 trillion.
What this implies is that during this period, the amount the Federal Government had with the CBN was far in excess of what it borrowed from the bank. The tide, however, turned in 2016 in the thick of the economic recession, pushing claims on the Federal Government by 107.5 percent to N5.22 trillion, from N2.51 trillion the previous, year while its deposit with the CBN only grew by 22.57 percent from N4.17 trillion in 2015 to N5.11 trillion in 2016. With this, net credit from the CBN to the government for the first time came to N109.6 billion.
The figure reversed in 2017, with an excess of N353.56 billion after the government’s deposit with the CBN increased to N6.23 trillion compared to the N5.88 trillion it borrowed.
Fast-forward to 2018, the Federal Government finances with the CBN went into an overdraft of N342.21 billion. In 2018, the amount borrowed by the FG from the CBN stood at N8.12 trillion compared to the N7.78 trillion it had with the bank.
HOPE MOSES-ASHIKE & MICHAEL ANI
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