Tilewa Adebajo, a corporate finance expert and economist, has strongly asserted that any attempts by the Federal Government and the Central Bank of Nigeria (CBN) to employ financial manoeuvres without a constitutional amendment as regards the ‘ways and means’ would constitute a breach of the law.
His opinion came in response to concerns raised about the unresolved status of the national ways and means cap, which had not been adequately addressed.
Furthermore, it was highlighted that the government, despite its existing debt burden, was still intending to secure loans of up to N7 billion to support women entrepreneurs across the country.
Adebayo made this remark during his guest appearance on the ARISE NEWS interview on Tuesday.
He said, “There is no law in place that says the government can securitize ways and means finances. And there is no president in Nigeria, according to Nigerian law, that can send a request to the Nigerian Senate to tell them to securitize ways and means. The only way it can be done is to amend Section 38 of the CBN Act. That has not been done.”
Read also:Expanding debt without accountability: ‘Ways and Means’
Many people, including foreign sources, suggest that the government should first study the economy before making new policies to improve it.
This advice comes as the country’s inflation rate reached a record high of nearly 30 percent in August, and the value of the naira dropped to its record low of N1,010 against the US dollar in the parallel market.
Adebajo mentioned earlier in the interview that although removing fuel subsidies was intended to save the country money for investments, it has proven challenging because the domestic petroleum price doesn’t align with global market prices.
Some believe this is a gradual reintroduction of the fuel subsidy, but NNPC’s Managing Director, Mele Kyari, has stated that the government has no plans to bring back the subsidy.
However, according to Adebajo, “Of course there is subsidy. I get information from the world markets, as all prices go up, the subsidies will erode and you have to increase that. But the other side which we never take into consideration is that when the oil prices drop, the fuel price will also drop. So we need to understand the dynamics and that’s not what we’ve been able to deal with.
“It’s rather unfortunate that we looked at a mechanism for closure of the window, but unfortunately the issues within the CBN balance sheet which was after exposure has meant that that couldn’t work. We saw the challenges with the reserves and the JP Morgan report that our net reserves are close to about four billion. That is where the problem is, we don’t have enough of the dollars to be able to manage that system.
Read also: Misplaced reactions to Senate approval of N22.7trn ways and means loan
“All these issues can be addressed by restructuring the balance of the CBN.”
The financial expert advised that it’s crucial for the government to first address their debt situation before initiating other projects.
“We need to reduce the ways and means to the right limit, and we need to amend Section 38 to allow whatever it is they are carrying in their balance sheet. Once you do that, we need to look at the swaps we have with the banks. Make sure we structure them so they can help with the foreign exchange.
“Then all those intervention loans—if you look at the CBN balance sheet, it’s a big loss. We need to reconcile those loans and take them out to development banks. Bank of Industry, Bank of Agriculture, and Development Bank of Nigeria—those three banks have the capacity to originate loans and also manage them.”
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