February 09, (THEWILL) – The Governor, Central Bank of Nigeria (CBN) , Dr Olayemi Cardoso has said the bank will no longer grant Ways and Means to the federal government without having all the outstanding balance settled.
Ways and Means is a loan facility through which the CBN finances the federal government’s budget shortfalls, also referred to as ‘printing money’.
Dr Cardoso also announced measures the CBN was taking to tame the rising inflation in the country which has led to an astronomical increase in the prices of goods and services.
He disclosed these on Friday when he appeared before the Senate Committee on Banking, Insurance and other Financial Institutions alongside the Minister of Finance and Coordinating Minister for the Economy, Olawale Edun, the Minister of Budget and National Planning, Atiku Bagudu and the Minister of Agriculture, Abubakar Kyari.
THEWILL recalls that last December, the National Assembly approved the securitisation of the outstanding debit balance of N7.3 trillion of the Ways and Means Advance in the Consolidated Revenue Fund (CRF) of the federal government.
The Ways and Means was a recurring loan the CBN issued to the federal government to finance shortfalls in the government budget during the Buhari-led government, which led to obvious abuse.
The scenario was widely criticized in the media and by stakeholders who raised the alarm of the imminent financial implosion it could cause the country.
Cardoso insisted that the central bank would not be a part of the Ways and Means agreement with the federal government again the latter failed to refund all the outstanding debts on the Ways and Means already advanced.
The CBN governor said the position complies with section (38) of the CBN Act (2007).
. Mr Cardoso said the payment of the outstanding balance of the Ways and Means will control inflation in the country.
He said, “I am pleased to note the Fiscal Authorities efforts in discontinuing Ways and Means advances.
“This is also in compliance with Section (38) of the CBN Act (2007), the Bank is no longer at liberty to grant further Ways and Means advances to the federal government until the outstanding balance as of December 31, 2023, is fully settled.
“The Bank must strictly adhere to the law limiting advances under Ways and Means to 5 per cent of the previous year’s revenue.
“We have also halted quasi-fiscal measures of over 10 trillion naira by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess Naira and raising prices to the levels of Inflation we are grappling with today.
“The CBN’s adoption of inflation-targeting framework involves clear communication and collaboration with fiscal authorities to achieve price stability, potentially leading to lowered policy rates, stimulating investment, and creating job opportunities
“Our MPC meeting on the 26th and 27th of February is also expected to review the situation and take further decisions on these important issues.”
Dr Cardoso told the lawmakers that “Distinguished senators, Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 per cent at the medium term, aided by improved agricultural productivity and easing global supply chain pressures.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.