CBN Provides 5% Ways and Means Financing to the Government.
The Central Bank of Nigeria (CBN) has announced its decision to continue offering Ways and Means Advances to the Federal Government, maintaining a limit of five percent for the fiscal years 2024-2025. This information comes from the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the specified fiscal years, which were published by the apex bank on Tuesday.
This recent announcement stands in contrast to a bill recently passed by the National Assembly that increased the maximum borrowing limit in the Act from five percent to ten percent. The CBN’s guidelines specify that it can provide advances up to five percent of the previous year’s actual collected revenue, with the requirement that these funds be repaid within the same fiscal year to avoid creating a long-term fiscal burden.
The guidelines are in line with the Medium-Term Fiscal Framework (MTFF), under which the CBN aims to manage expectations, implement consistent policies, address economic shocks, and support the ongoing recovery to ensure macroeconomic stability in the country.
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According to the document, “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 percent of the previous year’s actual collected revenue. 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.”
Furthermore, the CBN indicated that the advances would now be calculated after taking into account the sub-accounts of various Ministries, Departments, and Agencies (MDAs), which are linked to the Consolidated Revenue Fund. This approach aims to provide a clearer picture of the Federal Government’s consolidated cash position.
The CBN emphasized that this method of determining Ways and Means Advances will continue into the 2024-2025 fiscal years, aligning with the banking arrangement of the Treasury Single Account. This strategy is intended to enhance financial management and transparency.
In summary, the Ways and Means Advances serve as crucial loan facilities utilized by the CBN to support the government during times of temporary budget shortfalls, ensuring that fiscal operations can continue smoothly while maintaining a focus on repayment within the designated timeframe.
