Abuja — The Central Bank of Nigeria (CBN) has reaffirmed its decision to maintain the Ways and Means Advances limit to the Federal Government at five percent for the fiscal years 2024-2025, despite recent legislative changes proposing an increase.

The CBN’s latest policy guidelines, detailed in the Monetary, Credit, Foreign Trade, and Exchange Policy for the Fiscal Years 2024-2025, indicate that the apex bank will continue to provide advances up to five percent of the previous year’s actual collected revenue. These advances, intended to address temporary budget shortfalls, must be repaid within the same fiscal year to avoid long-term fiscal strain.

The decision contrasts with a recent bill passed by the National Assembly, which sought to raise the borrowing limit from five percent to ten percent. The CBN’s guidelines emphasize that the advances should be liquidated as quickly as possible, reinforcing the bank’s commitment to preventing prolonged fiscal burdens.

Policy Implementation and Adjustments

The new guidelines also introduce adjustments to the calculation of the advances. The CBN will now account for the sub-accounts of various Ministries, Departments, and Agencies (MDAs) linked to the Consolidated Revenue Fund to determine the Federal Government’s consolidated cash position. This adjustment aligns with the Treasury Single Account (TSA) system, ensuring a more accurate financial overview.

According to the guidelines, “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 it was granted.”

Historical Context and Future Outlook

The CBN’s decision comes in the wake of controversy surrounding the previous administration’s handling of Ways and Means Advances. In 2023, former CBN Governor Godwin Emefiele faced criticism for allegedly printing N22.7 trillion without National Assembly approval, contributing to inflation and increased money supply.

CBN Governor Olayemi Cardoso has indicated that the bank will suspend new Ways and Means Advances until existing loans are repaid, a move intended to stabilize the economic situation. As of recent reports, the Federal Government has repaid N7.3 trillion in Ways and Means Advances to the CBN.

Challenges Ahead

The CBN’s 218-page policy document also highlights potential challenges for the upcoming fiscal year, including risks from fuel subsidy removal, lower import bills, and increased external debt servicing obligations. These factors could negatively impact the growth of external reserves and pose economic risks.