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CBN maintains 5% ways and means advances to govt - PUNCH
The Central Bank of Nigeria has confirmed that it will sustain its Ways and Means Advances to the Federal Government at a five per cent limit for the fiscal years 2024-2025.
This information is based on the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the Fiscal Years 2024-2025, published by the apex bank on Tuesday.
The latest development is contrary to a bill passed by the National Assembly which raised the maximum borrowing percentage in the Act from five per cent to 10 per cent.
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.
“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.
The Ways and Means Advances are loan facilities used by the CBN to finance the government during periods of temporary budget shortfalls and are subject to limits imposed by law.
According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government with regards to temporary deficiency of budget revenue at such rate of interest as the bank may determine.
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.
At a Senate Committee meeting in February 2024, the CBN Governor, Olayemi Cardoso, said that the apex bank will no longer give Ways and Means to the Federal Government until the previous loans are repaid.
Olayemi noted that it was one of the measures taken by the apex bank to curtail the economic situation currently plaguing the country.
Recall that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, recently announced that the Federal Government had repaid N7.3tn in Ways and Means Advances to the apex bank.
Continuing in the 218-page document, the CBN highlighted challenges likely to be faced in the fiscal year.
It noted that fuel subsidy removal, lower import bills, and increased external debt servicing obligations could pose downside risks for the growth of external reserves by 2024/2025.
