The Central Bank of Nigeria (CBN) has confirmed that it will continue to cap its Ways and Means Advances to the federal government at a 5% limit for the fiscal years 2024-2025.
This decision stands in contrast to a recent bill passed by the National Assembly, which sought to raise the borrowing limit from 5% to 10%.
This announcement was outlined in the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the Fiscal Years 2024-2025, released by the CBN on Tuesday. The guidelines are designed to align with the Medium-Term Fiscal Framework (MTFF), under which the CBN aims to manage economic expectations, implement consistent policies, and address economic shocks to support recovery and macroeconomic stability.
According to the CBN, the Ways and Means Advances will continue to provide the federal government with funds to cover temporary budget deficits, limited to 5% of the previous year’s actual collected revenue. The document further stipulates that these advances must be repaid by the end of the year in which they are granted.
“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% of the previous year’s actual collected revenue,” the document states. “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.”
Additionally, the CBN noted that the advances will now take into account the sub-accounts of various Ministries, Departments, and Agencies (MDAs), which are linked to the Consolidated Revenue Fund in determining the Federal Government’s consolidated cash position.
In line with the Treasury Single Account arrangement, the CBN clarified that this process will continue through the 2024-2025 fiscal years.
Ways and Means Advances are short-term loan facilities provided by the CBN to finance temporary budget shortfalls and are subject to legal limits. Under Section 38 of the CBN Act, 2007, the central bank is authorised to grant temporary advances to the federal government to address budgetary revenue deficiencies at an interest rate determined by the bank.
Controversy surrounding the Ways and Means facility intensified in 2023, following revelations that the former CBN governor, Godwin Emefiele, allegedly printed N22.7 trillion for the administration of former President Muhammadu Buhari without approval from the National Assembly. Experts argue that the excessive use of this facility contributed to inflation and increased money supply in the economy.
At a Senate Committee meeting in February 2024, current CBN Governor, Olayemi Cardoso, stated that the bank would no longer extend additional Ways and Means Advances to the federal government until the existing debt is repaid. Cardoso noted that this move was part of the central bank’s efforts to stabilise the economy amidst ongoing challenges.
