Lamido Sanusi, former Governor of Central Bank of Nigeria; Presidency spokesman Garba Shehu.
What, When & Why
Nigeria's former central bank governor Lamido Sanusi claimed on 2 December that the government currently owes 50% of its domestic debt to the central bank, above the limit set by Nigerian law. Sanusi was speaking at an event organised by the Savannah Centre for Diplomacy, Democracy and Development on Abuja.
"The CBN-FGN [Federal Government of Nigeria] relationship is no longer independent," Sanusi said. "In fact one could argue their relationship has become unhealthy. CBN claims on the FGN now top NGN4.7 trillion – (US$15 billion) equal to almost 50% of the FGN's total domestic debts.
"This is a clear violation of the Central Bank Act of 2007 (Section 38.2) which caps advances to the FGN at 5% of last year's revenues. The overdrafts alone are equal to more than 10x that prescribed limit, and are growing every month. Has the CBN become the government's lender of last – or first – resort?1".
The presidency responded to Sanusi's claims saying the government's Central Consolidated Account with the central bank is indeed overdrawn, but that this is within the legal limit.
Presidency spokesman Garba Shehu said, "The overdraw does not exceed NGN1.5 trillion (US$5 billion). It is incorrect to say, as he did, that the account was overdrawn by NGN4.5 trillion.
"But even assuming that he was correct, this is a government that has money in excess the amount he mentioned in the Treasury Single Account (TSA). It is just like you, a bank customer operating two accounts, one in the red and the other, well funded to the point that it can at any time wipe the indebtedness on the other2".
The central bank also refuted Sanusi's claims. The bank said the government has about US$8 billion in the Treasury Single Account, a separate account with the bank where all revenue from government bodies accrue. The bank said this cancels the government's overdraft and leaves a net balance of about US$4 billion.
It is possible that Sanusi got some numbers wrong, but neither the central bank nor the presidency addressed his claim that the government's overdraft this year has exceeded 5% of the government's actual revenue last year. In any case, this incident raises questions about the government's fiscal situation and the independence of the central bank—a negative development for Nigeria's economic outlook.
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