The Central Bank of Nigeria (CBN) has confirmed that it will continue to cap its Ways and Means Advances to the Federal Government at 5% for the fiscal years 2024-2025. This decision is outlined in the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines published on Tuesday.
This move contrasts with recent National Assembly legislation that increased the borrowing limit from 5% to 10%. Under the new guidelines, the CBN will advance up to 5% of the previous year’s revenue, which must be repaid within the fiscal year to avoid long-term fiscal burdens.
The CBN’s decision aligns with the Medium-Term Fiscal Framework (MTFF), aiming to manage expectations and support macroeconomic stability. The policy stipulates that these advances are to be repaid as soon as possible and definitely by the end of the year in which they were granted.
In addition, advances will now be determined by considering the sub-accounts of various MDAs linked to the Consolidated Revenue Fund, reflecting the Federal Government’s consolidated cash position.
The Ways and Means Advances are utilized by the CBN to cover temporary budget shortfalls. The CBN Act of 2007 permits the bank to grant such advances at its discretion. Controversy arose in 2023 when former CBN Governor Godwin Emefiele allegedly printed N22.7 trillion without National Assembly approval, contributing to inflation.
Current CBN Governor Olayemi Cardoso announced that the bank would halt new advances until previous loans are repaid, a measure aimed at addressing the country’s economic issues. Finance Minister Wale Edun recently disclosed that the government had repaid N7.3 trillion of these advances.
The CBN’s guidelines also highlight potential challenges for the fiscal year, including fuel subsidy removal, lower import bills, and rising external debt servicing obligations, which could impact external reserves growth.
