Data collated from the Central Bank of Nigeria have shown that the Federal Government’s total borrowing through Ways and Means Advances of the bank has risen by 96.54 percent or 8.92tn in two years.
According to a year-on-year analysisIt rose from N9.24tn as of January 2020 to N18.16tn as of January 2022.
The Debt Management Office said N18.16tn owed by the Federal Government to the apex bank is not part of the country’s total public debt stock, which stood at N39.56tn as of December 2021.
The public debt stock only includes the debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory.
Ways and Means Advances is a loan facility through which the CBN finances the government’s budget’s shortfalls.
According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government with regard to temporary deficiency of budget revenue at such rate of interest as the bank may determine.
The Act read in part, “The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.
“All advances shall be repaid as soon as possible and shall, in any event, be repayable by the end of the Federal Government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.”
The CBN had said on its website that the Federal Government’s borrowing from it through the Ways and Means Advances could have adverse effects on the bank’s monetary policy to the detriment of domestic prices and exchange rates.
“The direct consequence of central banks’ financing of deficits are distortions or surges in the monetary base leading to adverse effects on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy,” it said.
Recall that the World Bank had in November last year warned the Nigerian government against financing deficits by borrowing from the CBN through the Ways and Means Advances, saying this put fiscal pressures on the country’s expenditures.
Also, the the Federal Government paid an interest of N2.03tn from January 2020 to November 2021 on the loans it got from the CBN through the Ways and Means Advances.