The Central Bank of Nigeria (CBN) has decided to uphold a 5% limit on Ways and Means Advances to the federal government for the 2024-2025 fiscal years, contrary to a recent proposal from the National Assembly to increase this limit to 10%. This decision was detailed in the CBN’s Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines released on Tuesday.
The guidelines stress the importance of maintaining macroeconomic stability and align with the Medium-Term Fiscal Framework (MTFF). The CBN aims to manage economic expectations, respond to shocks, and support ongoing economic recovery.
The policy states: “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.”
Furthermore, advances will now be calculated after considering sub-accounts of various Ministries, Departments, and Agencies (MDAs) linked to the Consolidated Revenue Fund to assess the Federal Government’s total cash position.
Ways and Means Advances are short-term loans provided by the CBN to help cover temporary budget shortfalls. The CBN Act of 2007 limits these advances to a percentage of the previous year’s revenue and mandates repayment within the fiscal year.
The handling of Ways and Means Advances has been contentious in recent years. In 2023, former CBN Governor Godwin Emefiele faced criticism for allegedly printing ₦22.7 trillion for the federal government without National Assembly approval, contributing to concerns about inflation and increased money supply.
In February 2024, current CBN Governor Olayemi Cardoso announced that the bank would suspend further advances until existing loans were repaid, as part of broader efforts to address the country’s economic challenges.
