CBN Defies NASS Proposal, Upholds 5% Ways And Means Advance Limit

The Central Bank of Nigeria (CBN) has announced its intention to maintain the Ways and Means Advances to the federal government at a limit of 5 percent for the fiscal years 2024-2025.

This decision stands in contrast to a recent bill passed by the National Assembly, which increased the maximum borrowing limit from five percent to ten percent.

The CBN’s move was revealed in the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the Fiscal Years 2024-2025, released by the apex bank on Tuesday.

The guidelines align with the Medium-Term Fiscal Framework (MTFF), under which the CBN aims to manage expectations, implement consistent policies, address economic shocks, and uphold the nation’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 stated that the advances will now be assessed following the identification of the sub-accounts associated with the various MDAs, which are now connected to the Consolidated Revenue Fund, in order to determine the FGN’s overall 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,” the bank’s document noted.

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It is worth noting that the Ways and Means Advances represent loan facilities utilized by the Central Bank of Nigeria (CBN) to support the government during temporary budget deficits, with legal limits governing their use.

As Section 38 of the CBN Act of 2007 outlines, the central bank is authorized to provide temporary advances to the Federal Government in response to shortfalls in budget revenue, with interest rates determined at the bank’s discretion.

In 2023, significant controversy arose regarding the amount sanctioned by the Central Bank for government use.

The former CBN governor, Godwin Emefiele, reportedly printed N22.7 trillion for former President Muhammadu Buhari under the Ways and Means framework without the necessary approval from the National Assembly.

Analysts suggest that this substantial sum has contributed to the soaring inflation rate and heightened money supply within the economy.

During a Senate Committee meeting in February 2024, CBN Governor Olayemi Cardoso announced that the central bank would cease providing Ways and Means advances to the Federal Government until the outstanding loans are settled.

Olayemi emphasized that this decision is part of the measures implemented by the central bank to address the ongoing economic challenges facing the country.