The Central Bank of Nigeria (CBN) says it has discontinued granting loans through its Ways and Means advances to the federal government.
The CBN Governor, Olayemi Cardoso, said the decision was because of the government’s failure to settle its outstanding debt.
Cardoso said this on Friday at an interactive session with the Senate Committee on Banking, Insurance and other Financial Institutions alongside the Minister of Finance and Coordinating Minister for the Economy, Olawale Edun, the Minister of Budget and National Planning, Atiku Bagudu and the Minister of Agriculture, Abubakar Kyari.
The Ways and Means is a loan facility the CBN gives the federal government to fund budget shortfalls.
The loan facility has been a subject of controversy, with experts expressing concern that CBN had exceeded its lending threshold to the federal government against extant laws.
The federal government’s borrowing from the CBN stood at N4.36 trillion as of June 2023, a month after former President Muhammadu Buhari securitised N22.7 trillion borrowed from the apex bank.
The outstanding debt of N4.36 trillion far exceeds five percent of the federal government’s revenue of N8.8 trillion for the year 2023 which is against CBN Act.
Between July and December 2023, the federal government tapped into the CBN for a substantial N2.94 trillion.
In December 2023, the parliament approved presidential request to securitise CBN’s N7.3trn Ways and Means advances to the federal government.
The apex bank’s governor said the loan to the federal government would stop until the outstanding balance is settled.
This, Cardoso said, was in compliance with Section (38) of the CBN Act (2007).
Cardoso said the payment of the outstanding balance of the Ways and Means would control inflation.
He said, “I am pleased to note the Fiscal Authorities efforts in discontinuing ways and means advances. This is also in compliance with Section (38) of the CBN Act (2007), the Bank is no longer at liberty to grant further ways and means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled. The Bank must strictly adhere to the law limiting advances under ways and means to 5 percent of the previous year’s revenue.
“We have also halted quasi-fiscal measures of over 10 trillion naira by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess Naira and raising prices to the levels of Inflation we are grappling with today.
“The CBN’s adoption of inflation-targeting framework involves clear communication and collaboration with fiscal authorities to achieve price stability, potentially leading to lowered policy rates, stimulating investment, and creating job opportunities.
“Our MPC meeting on the 26th and 27th of February is also expected to review the situation and take further decisions on these important issues.
“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 percent at the medium term, aided by improved agricultural productivity and easing global supply chain pressures”.