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The Central Bank of Nigeria (CBN) has announced that it will continue to limit its Ways and Means Advances to the Federal Government at 5% of the previous year’s actual collected revenue for the fiscal years 2024 and 2025.
This announcement was made in the CBN’s recently released Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the fiscal years 2024-2025. The move aligns with the apex bank’s mandate to maintain fiscal discipline, despite a bill passed by the National Assembly which had proposed an increase in the borrowing limit from 5% to 10%.
According to the CBN guidelines, Ways and Means Advances are short-term loan facilities provided to the Federal Government to cover budgetary shortfalls. These advances must be repaid within the same fiscal year to avoid accumulating a long-term fiscal burden. The guidelines reaffirm that the CBN will maintain the 5% limit, which is calculated based on the Federal Government’s actual revenue collection from the preceding year.
“The Central Bank will continue to extend Ways and Means Advances to the Federal Government up to a maximum of 5% of the previous year’s actual collected revenue. These advances must be liquidated as soon as possible and, in any case, repaid by the end of the fiscal year in which they were granted,” the document stated.
In line with the Treasury Single Account (TSA) system, the CBN further clarified that the calculation of these advances would now account for the various sub-accounts of Ministries, Departments, and Agencies (MDAs), all of which are linked to the Consolidated Revenue Fund. This ensures a more accurate determination of the Federal Government’s consolidated cash position.
“Ways and Means Advances will be calculated based on the recognition of sub-accounts from MDAs linked to the Consolidated Revenue Fund, providing a more precise cash position for the Federal Government,” the CBN noted.
The CBN’s Ways and Means Advances, governed by Section 38 of the CBN Act of 2007, allow the apex bank to offer temporary financial support to the Federal Government in the event of revenue shortfalls. However, these advances are subject to strict limits and must be repaid with interest determined by the bank.
In 2023, controversy erupted over the large sum of N22.7 trillion that the CBN extended to the Federal Government under this mechanism without approval from the National Assembly. The former CBN Governor, Godwin Emefiele, was criticized for allegedly printing the funds for the government of former President Muhammadu Buhari. Experts have since linked this excessive borrowing to Nigeria’s rising inflation and the oversupply of money in the economy.
At a Senate Committee meeting in February 2024, the current CBN Governor, Olayemi Cardoso, affirmed that the central bank would not issue any further Ways and Means Advances until the outstanding amounts had been fully repaid. This decision is part of broader efforts by the CBN to stabilize Nigeria’s economy and reduce inflationary pressures.
In line with this, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, recently disclosed that the Federal Government had repaid N7.3 trillion in outstanding Ways and Means Advances to the CBN.
The 218-page policy document also highlighted potential risks to Nigeria’s fiscal stability in the upcoming years. The CBN identified several challenges, including the removal of fuel subsidies, reduced import bills, and increased external debt servicing obligations. These factors could adversely affect the growth of Nigeria’s external reserves during the 2024-2025 fiscal period.
Despite these challenges, the CBN reiterated its commitment to implementing policies that would manage economic shocks and ensure Nigeria’s macroeconomic stability.
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