The Central Bank of Nigeria (CBN) has announced that it will maintain the Ways and Means Advances to the federal government at a 5% limit for the fiscal years 2024-2025, despite a recent bill passed by the National Assembly increasing the limit to 10%.
This decision was detailed in the CBN’s Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the 2024-2025 fiscal period, which were released on Tuesday.
These guidelines prioritize macroeconomic stability and are in line with the Medium-Term Fiscal Framework (MTFF), aiming to manage economic expectations, mitigate shocks, and support ongoing recovery.
The CBN’s statement read, “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.
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Such advances shall be liquidated as soon as possible and shall, in any event, be repayable at the end of the year in which they were granted.”
Additionally, the calculation of these advances will now include sub-accounts from various Ministries, Departments, and Agencies (MDAs) linked to the Consolidated Revenue Fund, to better assess the government’s overall cash position.
Ways and Means Advances are short-term loans provided by the CBN to help the government manage temporary budget deficits. Section 38 of the CBN Act of 2007 caps these advances at a certain percentage of the prior year’s revenue and requires repayment within the fiscal year.
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The use of this facility has been contentious in recent years, particularly in 2023 when former CBN Governor Godwin Emefiele was accused of printing ₦22.7 trillion for the federal government without approval from the National Assembly. Critics argue that excessive borrowing through this mechanism has contributed to inflation and increased money supply in the economy.
In February 2024, current CBN Governor Olayemi Cardoso informed the Senate Committee that the CBN would suspend further advances to the federal government until all outstanding loans had been repaid. This decision is part of a broader effort by the bank to tackle Nigeria’s economic challenges.
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