CBN Slashes Government Borrowing Cap to 5% after Rep Increased Rate
- The Federal Government would continue to receive Ways and Means Advances from the CBN, subject to a five percent ceiling
- A National Assembly-approved bill that raised the Act's maximum borrowing rate from 5% to 10% is in opposition to the most recent occurrence.
- The CBN further stated that after identifying the various MDAs' sub-accounts, the advances would now be decided
Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.
For the fiscal years 2024–2025, the Central Bank of Nigeria has affirmed that it will continue to provide Ways and Means Advances to the Federal Government up to a 5% cap.
Source: UGC
The apex bank released its Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the Fiscal Years 2024–2025 on Tuesday, upon which this information is based.
According to a Punch report, this counters a recent measure approved by the National Assembly that increased the Act's maximum borrowing rate from 5% to 10%.
Not more than 5%
The guidelines state that the CBN may advance to the Federal Government up to 5% of the actual revenue collected in the preceding year; however, in order to avoid creating a long-term financial burden, the advance must be repaid within the same year.
In order to promote the continued recovery and maintain the macroeconomic stability of the nation, the CBN will manage expectations, execute time-consistent policies, address shocks, and apply guidelines that are in keeping with the MTFF.
The document stated,
“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 per cent 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 it was granted.”
The CBN added that the advances would now be determined after recognising the sub-accounts of the various MDAs, which are now linked to the Consolidated Revenue Fund to arrive at the FGN consolidated cash position.
“Consistent with the banking arrangement of Treasury Single Account, Ways and Means Advances would now be determined after recognising the sub-accounts of the various MDAs, which are now linked to the Consolidated Revenue Fund to arrive at the FGN consolidated cash position. This would continue in the 2024/2025 fiscal years,” It noted.
The CBN further stated that in order to arrive at the FGN consolidated cash position, the sub-accounts of the various MDAs will now be recognized and used to determine the advances. These accounts are currently connected to the Consolidated Revenue Fund.
The amount that the Central Bank had authorized for the government to receive was the subject of intense discussion in 2023. Without the National Assembly's consent, former CBN Governor Godwin Emefiele is accused of printing N22.7 trillion for former President Muhammadu Buhari under Ways and Means.
Experts said that the huge sum is a factor in both the economy's elevated money circulation and high rate of inflation.
The governor of the CBN, Olayemi Cardoso, stated before a Senate Committee in February 2024 that the central bank will not continue to provide the federal government with Ways and Means until the outstanding debts are paid back.
Olayemi pointed out that it was one of the actions taken by the top bank to alleviate the nation's current economic crisis.
FG settles important debt with a domestic creditor
Legit.ng reported that the Nigerian government had allocated about N4.83 trillion from the earnings of Nigerian Treasury Bills (NTBs) and Bonds issued in 2024 to settle the Ways and Means advances from the Central Bank of Nigeria (CBN).
The minister of Finance and coordinating minister of the Economy, Wale Edun, said this during his presentation at the Lagos Business School Breakfast Club.
In 2023, the Nigerian government obtained about N2.94 trillion from the apex bank via the Ways and Means advances to service domestic debts.
Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng
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