The Central Bank of Nigeria (CBN) has reaffirmed its commitment to maintaining a constitutional cap on Ways and Means Advances, restricting such advances to 5 percent of the previous year’s actual revenue collection. This decision is part of the CBN’s monetary and credit policy guidelines for the 2024-2025 fiscal years, released on Tuesday.
According to the guidelines, Ways and Means Advances will remain accessible to the federal government for budget deficit financing, but must be repaid by the end of the fiscal year in which they are granted. The CBN emphasized the importance of liquidating these advances promptly, reinforcing the principle of short-term borrowing.
In line with the Treasury Single Account (TSA) framework, the CBN has also updated its methodology for calculating these advances to include sub-accounts of Ministries, Departments, and Agencies (MDAs) linked to the Consolidated Revenue Fund (CRF). This adjustment aims to provide a more accurate picture of the federal government’s consolidated cash position, enhancing transparency in public financial management.
The CBN Act permits the bank to issue temporary advances to the federal government to address short-term revenue deficits, but it strictly states that the total outstanding amount must not exceed 5 percent of the previous year’s actual revenue. If advances remain unpaid by the fiscal year’s end, the CBN will not grant further advances until the outstanding amounts are settled.
Recently, the Senate and House of Representatives passed a bill to raise the cap on Ways and Means loans from 5 percent to 10 percent of annual revenue. This shift reflects the federal government’s growing reliance on these loans for budgetary funding, which has surged over 2,900 percent in the past seven years, reaching an alarming N23.7 trillion.
This sharp increase has raised concerns about inflation and Nigeria’s escalating debt burden. Earlier this year, CBN Governor Yemi Cardoso announced a halt on issuing new Ways and Means advances until existing loans are repaid, marking a critical measure to address the country’s economic challenges.
Written By : Idu Sunita