The Central Bank of Nigeria (CBN) has announced that it will maintain its Ways and Means Advances to the Federal Government at a 5% limit for the fiscal years 2024-2025. This decision published by the Apex bank on Tuesday, is outlined in the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the upcoming fiscal period.
This development contradicts a recent bill passed by the National Assembly, which sought to increase the maximum borrowing percentage from 5% to 10%.
The Central Bank of Nigeria’s commitment to maintaining the original limit underscores its dedication to managing budgetary deficits within established legal frameworks, despite legislative efforts to increase borrowing capacity.
According to the guidelines, the CBN can advance up to five per cent of the previous year’s actual collected revenue to the Federal Government, which must be repaid within the year to prevent a long-term fiscal burden.
The guideline aligns with the MTFF, under which the CBN will manage expectations, implement time-consistent policies, address shocks to support the ongoing recovery and ensure the country’s macroeconomic stability.
The document stated, “Ways and Means Advances shall continue to be available to the Federal Government to finance deficits in its budgetary operations to a maximum of 5.0 per cent of the previous year’s actual collected revenue. Such advances shall be liquidated as soon as possible and shall in any event be repayable at the end of the year in which it was granted.”
The CBN added that the advances would now be determined after recognising the sub-accounts of the various MDAs, which are now linked to the Consolidated Revenue Fund to arrive at the FGN consolidated cash position.
“Consistent with the banking arrangement of Treasury Single Account, Ways and Means Advances would now be determined after recognising the sub-accounts of the various MDAs, which are now linked to the Consolidated Revenue Fund to arrive at the FGN consolidated cash position. This would continue in the 2024/2025 fiscal years,” It noted.
Ways and Means Advances are loan facilities provided by the Central Bank of Nigeria (CBN) to support the government during temporary budget shortfalls. These advances are subject to legal limits.
As stipulated in Section 38 of the CBN Act, 2007, the CBN can extend temporary advances to the Federal Government to address short-term budget revenue deficiencies, with the interest rate determined by the CBN.
In 2023, there was serious controversy concerning the amount approved by the Central Bank to the government. The former CBN Governor, Godwin Emefiele, without approval from the National Assembly, allegedly printed the sum of N22.7tn for former President Muhammadu Buhari under Ways and Means.
Experts believe the large amount contributes to the high inflation rate and increased money circulation in the economy.
Olayemi Cardoso, the CBN Governor, at a senate Committee in February, 2024, announced that the Central Bank of Nigeria (CBN) would no longer provide Ways and Means Advances to the Federal Government until the outstanding loans are repaid. Olayemi stated that this decision is part of the apex bank’s measures to address the current economic challenges facing the country.
It is worth noting that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, recently reported that the Federal Government had repaid N7.3 trillion in Ways and Means Advances to the CBN.
In a 218-page document, the CBN outlined potential challenges for the fiscal year, highlighting that the removal of fuel subsidies, lower import bills, and increased external debt servicing obligations could pose risks to the growth of external reserves in 2024/2025.
This article was written by Tamaraebiju Jide, a student at Elizade University
