The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso has officially announced that the apex bank will halt the provision of Ways and Means advances to the federal government unless the unsettled outstanding balance is duly cleared. Cardoso, the CBN Governor, mentioned this statement during a session with the Senate Committee on Banking, Insurance, and Other Financial Institutions, and in the presence of various government officials including Atiku Bagudu, the Minister of Budget and Economic Planning; Wale Edun, the Minister of Finance and Coordinating Minister for the Economy; Abubakar Kyari, the Minister of Agriculture and Food Security; Sani Abdullahi, the CBN’s Deputy Governor of Economic Policy, and Aliyu Abdullahi, the Minister of State for Agriculture.
Through the provision of Ways and Means loans, the CBN grants funds to the federal government to address budget deficiencies. In December 2023, the National Assembly granted approval for securitizing the remaining debit balance of ₦7.3 trillion from the Ways and Means Advance. This amount will be consolidated into the Federal Government’s Consolidated Revenue Fund (CRF). There was widespread worry and unease among the populace when the Debt Management Office (DMO) made an announcement regarding the federal government’s borrowing activities, revealing that the borrowing from CBN reached a massive sum of ₦18.16 trillion in March 2022.
Section (38) of the CBN Act (2007) affirms this course of action.
Cardoso affirmed that unless the federal government repays all the unpaid debts, the apex bank will no longer participate in any Ways and Means agreement. He emphasized that this course of action is in accordance with section (38) of the CBN Act (2007). The Bank’s ability to extend additional ways and means advances to the Federal Government is currently restricted until the outstanding balance as of December 31, 2023 is fully resolved. Adherence to the legal provisions, which cap ways and means advances at five percent of the prior year’s revenue, is mandatory for the Bank.
According to the CBN governor of the, settling the outstanding debt of the Ways and Means is crucial for reining in inflation within the country. He mentioned that the bank has put a stop to quasi-fiscal actions exceeding ₦10 trillion, previously taken by the apex Bank of Nigeria under the pretence of development finance interventions. These measures had been contributing to the excessive circulation of Naira and subsequently driving up prices to their current inflated levels. Regardless, he did not mention whether the federal government had exceeded the advancements boundary outlined in the CBN Act.
FG borrowing from CBN reached ₦4.36 trillion in June 2023.
He mentioned that the upcoming Monetary Policy Committee (MPC) meeting scheduled for the end of February will assess the current circumstances and make additional resolutions concerning these crucial matters. The CBN’s implementation of an inflation-targeting strategy involves the necessity of effective interaction and partnership with fiscal authorities in order to attain stability in prices, which could potentially result in reduced policy rates, promoting investments, and generating employment prospects. With the introduction of this policy which strives to limit inflation to 21.4 percent in the medium term, he said inflationary pressures are expected to reduce in 2024.
These efforts will be supported by enhanced agricultural productivity and the alleviation of global supply chain constraints. Official data reveals that as of June 2023, the federal government borrowing from the Central Bank of Nigeria had accumulated to a debt of ₦4.36 trillion, after a significant portion of the total debt was securitized by the previous administration. It is worth noting that the then administration secured ₦22.7 trillion borrowed from the Ways and Means Advances towards the end of his eight-year tenure.
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Nevertheless, it was reported that the substantial debt amounting to ₦4.36 trillion significantly surpasses the five percent of the federal government’s ₦8.8 trillion revenue from the preceding year. Prior to the securitisation process, the debt owed to the central bank had skyrocketed to an alarming ₦26.95 trillion by May 2023, ultimately leading to an addition of ₦22.7 trillion to the nation’s overall public debt stock. As of June, the total public debt escalated from ₦49.85 trillion in May 2023 to a staggering ₦87.38 trillion, as stated by the Debt Management Office in September of that same year.