$25bn CBN Overdraft: SERAP Writes Buhari, Seeks Spending Details Of Overdrafts Since 1999

Socio-Economic Rights and Accountability Project (SERAP) has
urged President Muhammadu Buhari to “provide spending details of
the overdrafts and loans obtained from the Central Bank of Nigeria
(CBN) by the Federal Government since May 29, 2015 including the
total overdrafts, the projects on which the overdrafts have been
spent; repayment of all overdrafts to date, as well as to clarify
whether the $25bn (N9.7trn) overdraft reportedly obtained from the
CBN is within the five-percent limit of the actual revenue of the
government for 2020.”

The organization is also urging him to “provide details of
spending of overdrafts and loans obtained from the CBN by
successive governments between 1999 and 2015.”

In the Freedom of Information request dated 6 March, 2021 and
signed by SERAP deputy director Kolawole Oluwadare, the
organization said: “Ensuring transparency and accountability in the
spending of CBN overdrafts and loans would promote prudence in debt
management, reduce any risks of corruption and mismanagement, and
help the government to avoid the pitfalls of excessive debt.”

SERAP said: “Disclosing details of CBN overdrafts and repayments
would enable Nigerians to hold the government to account for its
fiscal management and ensure that public funds are not diverted,
thereby improving the ability of your government to effectively
respond to the COVID-19 crisis. This means that the government
would not have to choose between saving lives or making debt
payments.”

According to SERAP, “The increasing level of public debt would
threaten the ability of the government to invest in essential
public goods and services, such as quality education, healthcare,
and clean water. It is the primary responsibility of the government
to ensure public access to these services in order to lift millions
of Nigerians out of poverty and to achieve the Sustainable
Development Goals by 2030.”

The FoI, read in part: “The growing level of public debt would
increase debt-servicing costs, which would mean that your
government has less resources to spend on these critical public
services.”

“We would be grateful if the requested information is provided
to us within 14 days of the receipt and/or publication of this
letter. If we have not heard from you by then, the Incorporated
Trustees of SERAP shall take all appropriate legal actions to
compel your government to comply with our request.”

“SERAP is concerned about the growing level of debts by the
Federal Government, and the apparent lack of transparency and
accountability in the spending of overdrafts and loans so far
obtained from the CBN, as well as the repayments to date.”

“Also, the recent overdraft of $25.6bn (about N9.7trn) obtained
from the CBN would appear to be above the five-percent limit of the
actual revenue of the Federal Government for 2020, that is,
N3.9trn, prescribed by Section 38(2) of the CBN Act 2007. SERAP
notes that five-percent of N3.9trn is N197bn.”

“While section 38(1) of the CBN Act allows the Bank to grant
overdrafts to the Federal Government to address any temporary
deficiency of budget revenue, sub-section 2 provides that any
outstanding overdraft ‘shall not exceed five-percent of the
previous year’s actual revenue of the Federal Government.’
Similarly, Section 38(3) requires all overdrafts to ‘be repaid as
soon as possible and by the end of the financial year in which the
overdrafts are granted.’”

“The CBN is prohibited from granting any further overdrafts
until all outstanding overdrafts have been fully repaid. Under the
CBN Act, ‘no repayment shall take the form of a promising note or
such other promise to pay at a future date, treasury bills, bonds
or other forms of security which is required to be underwritten by
the Bank.’”

“Similarly, the Fiscal Responsibility Act provides in section 41
that government ‘shall only borrow for capital expenditure and
human development.’ Under the Act, the government ‘shall ensure
that the level of public debt as a proportion of national income is
held at a sustainable level.’”

“Section 44 of the Act requires the government to specify the
purpose of any borrowing, which must be applied towards capital
expenditures, and to carry out cost-benefit analysis, including the
economic and social benefits of any borrowing. Any borrowing should
serve the public good, and be guided by human rights
principles.”

“By the combined reading of the provisions of the Constitution
of Nigeria 1999 (as amended), the Freedom of Information Act, UN
Convention against Corruption, the International Covenant on
Economic, Social and Cultural Rights, and the African Charter on
Human and Peoples’ Rights, there are transparency obligations
imposed on your government to disclose information to the public
concerning spending of CBN overdrafts, loans and repayments to
date.”

“The Nigerian Constitution, Freedom of Information Act, and
these treaties rest on the principle that citizens should have
access to information regarding their government’s activities.”

“SERAP has consistently recommended to the Federal Government to
reduce its level of borrowing and to look at other options of how
to finance its budget, such as reducing the costs of governance,
and addressing systemic and widespread corruption in ministries,
departments and agencies (MDAs) that have been documented by the
Office of the Auditor-General of the Federation.”

“Our requests are brought in the public interest, and in keeping
with the requirements of the Nigerian Constitution; the Freedom of
Information Act; the Fiscal Responsibility Act; the Central Bank
Act; the Debt Management Office Act; and the country’s
international obligations including under the UN Convention against
Corruption; the International Covenant on Economic, Social and
Cultural Rights, and the African Charter on Human and Peoples’
Rights. Nigeria has ratified these treaties.”

“According to our information, your government has reportedly
recently obtained $25 billion from the CBN as overdrafts. The
Federal Government has also reportedly decided to convert the
overdrafts to long-term debt. This latest borrowing from the CBN is
in addition to reported over $20 billion external debt, and N7
trillion domestic debt.”

The letter is copied to Mr Abukabar Malami, SAN, Attorney
General of the Federation and Minister of Justice; Mrs Zainab
Ahmed, Minister of Finance, Budget and National Planning; Godwin
Emefiele, the Governor of CBN; and Ms Patience Oniha,
Director-General of the Debt Management Office.

Socio-Economic Rights and Accountability Project (SERAP) has
urged President Muhammadu Buhari to “provide spending details of
the overdrafts and loans obtained from the Central Bank of Nigeria
(CBN) by the Federal Government since May 29, 2015 including the
total overdrafts, the projects on which the overdrafts have been
spent; repayment of all overdrafts to date, as well as to clarify
whether the $25bn (N9.7trn) overdraft reportedly obtained from the
CBN is within the five-percent limit of the actual revenue of the
government for 2020.”

The organization is also urging him to “provide details of
spending of overdrafts and loans obtained from the CBN by
successive governments between 1999 and 2015.”

In the Freedom of Information request dated 6 March, 2021 and
signed by SERAP deputy director Kolawole Oluwadare, the
organization said: “Ensuring transparency and accountability in the
spending of CBN overdrafts and loans would promote prudence in debt
management, reduce any risks of corruption and mismanagement, and
help the government to avoid the pitfalls of excessive debt.”

SERAP said: “Disclosing details of CBN overdrafts and repayments
would enable Nigerians to hold the government to account for its
fiscal management and ensure that public funds are not diverted,
thereby improving the ability of your government to effectively
respond to the COVID-19 crisis. This means that the government
would not have to choose between saving lives or making debt
payments.”

According to SERAP, “The increasing level of public debt would
threaten the ability of the government to invest in essential
public goods and services, such as quality education, healthcare,
and clean water. It is the primary responsibility of the government
to ensure public access to these services in order to lift millions
of Nigerians out of poverty and to achieve the Sustainable
Development Goals by 2030.”

The FoI, read in part: “The growing level of public debt would
increase debt-servicing costs, which would mean that your
government has less resources to spend on these critical public
services.”

“We would be grateful if the requested information is provided
to us within 14 days of the receipt and/or publication of this
letter. If we have not heard from you by then, the Incorporated
Trustees of SERAP shall take all appropriate legal actions to
compel your government to comply with our request.”

“SERAP is concerned about the growing level of debts by the
Federal Government, and the apparent lack of transparency and
accountability in the spending of overdrafts and loans so far
obtained from the CBN, as well as the repayments to date.”

“Also, the recent overdraft of $25.6bn (about N9.7trn) obtained
from the CBN would appear to be above the five-percent limit of the
actual revenue of the Federal Government for 2020, that is,
N3.9trn, prescribed by Section 38(2) of the CBN Act 2007. SERAP
notes that five-percent of N3.9trn is N197bn.”

“While section 38(1) of the CBN Act allows the Bank to grant
overdrafts to the Federal Government to address any temporary
deficiency of budget revenue, sub-section 2 provides that any
outstanding overdraft ‘shall not exceed five-percent of the
previous year’s actual revenue of the Federal Government.’
Similarly, Section 38(3) requires all overdrafts to ‘be repaid as
soon as possible and by the end of the financial year in which the
overdrafts are granted.’”

“The CBN is prohibited from granting any further overdrafts
until all outstanding overdrafts have been fully repaid. Under the
CBN Act, ‘no repayment shall take the form of a promising note or
such other promise to pay at a future date, treasury bills, bonds
or other forms of security which is required to be underwritten by
the Bank.’”

“Similarly, the Fiscal Responsibility Act provides in section 41
that government ‘shall only borrow for capital expenditure and
human development.’ Under the Act, the government ‘shall ensure
that the level of public debt as a proportion of national income is
held at a sustainable level.’”

“Section 44 of the Act requires the government to specify the
purpose of any borrowing, which must be applied towards capital
expenditures, and to carry out cost-benefit analysis, including the
economic and social benefits of any borrowing. Any borrowing should
serve the public good, and be guided by human rights
principles.”

“By the combined reading of the provisions of the Constitution
of Nigeria 1999 (as amended), the Freedom of Information Act, UN
Convention against Corruption, the International Covenant on
Economic, Social and Cultural Rights, and the African Charter on
Human and Peoples’ Rights, there are transparency obligations
imposed on your government to disclose information to the public
concerning spending of CBN overdrafts, loans and repayments to
date.”

“The Nigerian Constitution, Freedom of Information Act, and
these treaties rest on the principle that citizens should have
access to information regarding their government’s activities.”

“SERAP has consistently recommended to the Federal Government to
reduce its level of borrowing and to look at other options of how
to finance its budget, such as reducing the costs of governance,
and addressing systemic and widespread corruption in ministries,
departments and agencies (MDAs) that have been documented by the
Office of the Auditor-General of the Federation.”

“Our requests are brought in the public interest, and in keeping
with the requirements of the Nigerian Constitution; the Freedom of
Information Act; the Fiscal Responsibility Act; the Central Bank
Act; the Debt Management Office Act; and the country’s
international obligations including under the UN Convention against
Corruption; the International Covenant on Economic, Social and
Cultural Rights, and the African Charter on Human and Peoples’
Rights. Nigeria has ratified these treaties.”

“According to our information, your government has reportedly
recently obtained $25 billion from the CBN as overdrafts. The
Federal Government has also reportedly decided to convert the
overdrafts to long-term debt. This latest borrowing from the CBN is
in addition to reported over $20 billion external debt, and N7
trillion domestic debt.”

The letter is copied to Mr Abukabar Malami, SAN, Attorney
General of the Federation and Minister of Justice; Mrs Zainab
Ahmed, Minister of Finance, Budget and National Planning; Godwin
Emefiele, the Governor of CBN; and Ms Patience Oniha,
Director-General of the Debt Management Office.