Ways and Means Advances to continue at 5% threshold, CBN says in new guidelines 

The Central Bank of Nigeria (CBN) has reaffirmed that its Ways and Means Advances to the federal government will continue to be maintained at the 5% threshold for fiscal years 2024-2025.

This is according to the Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2024-2025 document released by the CBN on Tuesday.

According to the guidelines, the CBN can advance up to 5% of the previous year’s actual collected revenue to the Federal Government, which must be repaid within the year to prevent a long-term fiscal burden.

The document read: “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.” 

CBN to consider sub-accounts of MDAs in calculating threshold 

The CBN further clarified that the advances would be determined by recognizing the sub-accounts of various Ministries, Departments, and Agencies (MDAs) linked to the Consolidated Revenue Fund (CRF).

This ensures a consolidated cash position for the Federal Government, in line with Treasury Single Account (TSA) arrangements.

The apex bank noted: “Consistent with the banking arrangement of Treasury Single Account (TSA), 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 (CRF) to arrive at the FGN consolidated cash position. This would continue in the 2024/2025 fiscal years.”

What you should know 

The Senate and the House of Representatives recently passed a bill to increase the percentage of Ways and Means loans the Central Bank of Nigeria (CBN) can give to the federal government.

• The upper chamber of the Nigerian legislature raised the credit facility obtainable by the federal government from the apex bank from 5% to 10% of the revenue of a fiscal year.
• However, Murtala Sabo Sagagi, a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), expressed concerns that the proposed increase in the Federal Government of Nigeria’s Ways and Means limit from 5% to 10% could lead to a significant surge in excess liquidity within the Nigerian economy.
• Sagagi noted that this development poses a risk of exacerbating inflationary pressures and undermining the efforts of the CBN to stabilize the economy through its tight monetary policy stance.
• The Ways and Means facility allows the apex bank to provide short-term financing to the federal government to address budget shortfalls.
• The Ways and Means advance from the CBN has been exposed to all forms of misappropriation in the past, making this bill a very controversial one.
• In May 2023, shortly before the end of the Buhari government, the Senate approved the request of the then President to restructure the N22.7 trillion loans the CBN extended to the federal government under its Ways and Means provision.
• Earlier in the year, the Governor of the Central Bank of Nigeria, Yemi Cardoso, said that the apex bank will no longer give Ways and Means to the federal government until the previous loans are repaid.
• Cardoso noted that it was one of the measures taken by the apex bank to curtail the economic country currently plaguing the country.

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, recently announced that the federal government has repaid N7.3 trillion in ways and means advances to the apex bank.