CBN Reinforces Fiscal Discipline: Ways and Means Advances to Remain at 5% Threshold for 2024-2025

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In a strategic move to address Nigeria’s economic challenges, the Central Bank of Nigeria (CBN) has confirmed that its Ways and Means Advances to the federal government will continue to be capped at a 5% threshold for the fiscal years 2024-2025. This decision is part of the recently released Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines, aimed at promoting fiscal responsibility and economic stability, OBSERVERSTIMES .

The CBN’s guidelines obtains by OBSERVERSTIMES. allow for advances up to 5% of the previous year’s actual collected revenue, with a strict requirement for repayment within the same fiscal year. This approach is designed to prevent long-term fiscal burdens and maintain a balanced budgetary framework. The guidelines state: “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.”

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To enhance fiscal transparency and accountability, the CBN will now consider the sub-accounts of various Ministries, Departments, and Agencies (MDAs) linked to the Consolidated Revenue Fund (CRF) when calculating the threshold for these advances. This adjustment aligns with the Treasury Single Account (TSA) framework, ensuring a consolidated cash position for the federal government.

Despite recent legislative efforts to increase the allowable percentage of Ways and Means loans from 5% to 10%, concerns have been raised regarding the potential inflationary impact of such a change. Murtala Sabo Sagagi, a member of the Monetary Policy Committee, cautioned that increasing the limit could lead to excess liquidity in the economy, complicating the CBN’s efforts to stabilize inflation and maintain a tight monetary policy stance.

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Historically, the Ways and Means facility has faced scrutiny due to instances of misappropriation. Earlier this year, CBN Governor Yemi Cardoso announced a halt to new advances until previous loans are repaid, a measure aimed at curbing the economic challenges currently facing the nation. The recent repayment of N7.3 trillion by the federal government underscores a commitment to fiscal discipline and responsible financial management.

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As Nigeria navigates its economic landscape, the CBN’s decision to maintain the 5% threshold for Ways and Means Advances reflects a dedication to ensuring fiscal prudence and fostering a stable economic environment.

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