The Central Bank of Nigeria (CBN) has announced that it will maintain the 5% cap on its Ways and Means Advances to the federal government for the fiscal years 2024-2025. This decision directly contrasts with a bill passed by the National Assembly, which had increased the maximum borrowing limit from 5% to 10%.
The policy was outlined in the CBN’s Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for 2024-2025, released on Tuesday. The guidelines, in line with the Medium-Term Fiscal Framework (MTFF), reaffirm the CBN’s commitment to managing economic expectations, implementing time-consistent policies, and addressing fiscal shocks to support the nation’s recovery and macroeconomic stability.
According to the CBN’s document, “Ways and Means Advances will continue to be available to the Federal Government to finance budget deficits, but will remain capped at 5.0% of the previous year’s actual revenue collection. These advances must be repaid by the end of the year in which they are issued.”
The CBN also noted that the advances will be calculated after factoring in the sub-accounts of various Ministries, Departments, and Agencies (MDAs), which are now linked to the Consolidated Revenue Fund, to determine the federal government’s consolidated cash position. This arrangement, which follows the Treasury Single Account system, will continue through the 2024/2025 fiscal period.
Ways and Means Advances are short-term loans provided by the CBN to the federal government to cover temporary budget shortfalls, with borrowing limits governed by law. Section 38 of the CBN Act 2007 allows the apex bank to grant such advances, but the loans must be repaid within the fiscal year.
In 2023, the use of these advances became a topic of controversy when it was revealed that the CBN, under former Governor Godwin Emefiele, allegedly printed ₦22.7 trillion without National Assembly approval to fund the administration of former President Muhammadu Buhari. Experts believe this excessive borrowing contributed to inflation and increased money supply in the economy.
At a Senate Committee hearing in February 2024, current CBN Governor Olayemi Cardoso announced that the bank would not issue new Ways and Means Advances to the federal government until all previous loans had been repaid. This, he said, was part of the bank’s strategy to address the economic challenges facing the country.
More details on this development are expected soon.
