CBN Misappropriated N2.7tn Interests on Ways and Means – Auditor-General

The Federal Government has accused the Central Bank of Nigeria (CBN) of misappropriating N2.73 trillion in interest payments from Ways and Means advances, raising serious concerns over irregularities in managing government funds.

The allegation was disclosed in the consolidated financial statement of the Federal Government for the year ended December 31, 2021, submitted to the National Assembly by the Auditor-General, Shaakaar Chira, with reference number AuGF/AR.2021/01 and dated July 31, 2024.

The Ways and Means facility, a temporary loan mechanism provided by the CBN to the government to finance budget deficits, is at the centre of the controversy.

According to the report, the Federal Government claimed that the CBN retained interest charges amounting to N2.73 trillion, using the funds “for its sole benefit” rather than returning them to the Consolidated Revenue Fund (CRF).

The negative cash balance of the CRF stood at N17.1 trillion as of December 31, 2021, a figure which also included N4.4 trillion in Ways and Means advances.

The Constitution of the Federal Republic of Nigeria, 1999 (as amended), and the Financial Regulations of 2009 strictly prohibit unauthorised withdrawals from the CRF or overdrawn government accounts.

Section 80(2) of the Constitution states that no funds shall be withdrawn from the CRF without approval by an appropriation act or supplementary act, while paragraph 710 of the Financial Regulations bars overdrafts and mandates that any interest incurred must be refunded.

The report, however, revealed that the CRF and four other ministries, departments, and agencies had overdrawn accounts totalling N17.1 trillion, a figure not supported by appropriate approvals or documentation.

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The breakdown of the CRF’s negative balance included 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.

Other components included deferred state loan deductions and CPV coupon payments.

The report read, “The CRF negative balance of (N17,105,111,709,523.00) as at 31st December 2021 included actual Ways and Means advance of N4.4 trillion taken by Government and interest charged on it for the sole use of CBN as though the Ways and Means a loan from CBN funds or from any syndicated group of lenders.”

The Federal Government, in its response, stated that the CBN had mismanaged the Ways and Means facility, treating it as though the funds were loans from its balance sheet or a syndicated facility from local or foreign lenders.

It argued that the N2.73 trillion interest charged on these advances was wrongly retained by the apex bank and called for its immediate refund to the CRF.

The report noted, “The interest charged on Ways and Means by CBN was misappropriated by CBN for its sole use whereas the Actual Ways and Means was not a facility from its funds or balance sheet, nor was it a syndicated facility from a group of local and foreign lenders.

“CBN must therefore refund to the Federal Government of Nigeria the interest of N2.73 trillion it cornered for its sole use as of 31st December 2021.”

The government further instructed that the interest charges should not be securitised, unlike other components of the overdraft being handled by the Debt Management Office.

The Office of the Auditor-General, in its evaluation, maintained that the findings remained valid until the Federal Government provided evidence of proper approvals and documentation for the transactions.

The Auditor-General recommended that the Accountant-General of the Federation justify the N17.1 trillion overdraft to the Public Accounts Committees of the National Assembly and ensure that sanctions outlined in paragraph 3106 of the Financial Regulations were applied for irregular payments from public funds.

The audit report attributed the irregularities to weaknesses in the internal control processes at the Office of the Accountant-General of the Federation, describing the situation as a significant risk to public finance.

It warned that the unauthorised financing of expenditures and avoidable interest payments exposed the government to unnecessary fiscal burdens

1. What is Ways and Means?
   • The Ways and Means facility is like a short-term loan that the Central Bank of Nigeria (CBN) gives to the Federal Government when it needs extra money to cover its expenses.
   • Over time, the government borrowed a lot of money from the CBN through this facility. By the end of 2021, the government had borrowed so much that it owed a total of N17.1 trillion, which included N4.4 trillion from the Ways and Means facility.
   • When the government borrows money, it has to pay interest on it. The Auditor-General found that the CBN charged N2.73 trillion in interest on these loans but kept the money for itself instead of returning it to the government’s main account (the Consolidated Revenue Fund or CRF).
   • According to Nigeria’s Constitution and Financial Regulations, the CBN is not supposed to keep this interest money. It should go back to the government’s main account. The Auditor-General’s report pointed out that this was not done properly, and the CBN kept the money for its own use.
   • The Federal Government said that the CBN treated the borrowed money as if it was from its own funds or from other lenders, which was not correct. The government demanded that the CBN return the N2.73 trillion interest to the CRF.
   • The Auditor-General recommended that the Accountant-General of the Federation explain the N17.1 trillion overdraft to the National Assembly and ensure that any irregular payments are addressed. The report also highlighted weaknesses in the internal controls at the Office of the Accountant-General, which need to be fixed to prevent such issues in the future.