The Central Bank of Nigeria (CBN) has resolved to maintain a five percent limit on Ways and Means Advances to the Federal Government for the 2024-2025 fiscal years.
This decision directly counters the recent amendment passed by the National Assembly, which sought to increase the borrowing limit from five percent to 10 percent.
This information was contained in the apex bank’s Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for 2024-2025 published on Tuesday, which shed light on the bank’s fiscal strategies amid rising economic pressures.
Ways and Means Advances refer to temporary loans the CBN provides to the Federal Government to bridge fiscal deficits.
Under this policy, the Federal Government is permitted to borrow up to five percent of the actual collected revenue from the previous year.
The CBN stressed that these advances must be repaid within the fiscal year they are granted with liquidation being prioritised “as soon as possible.”
This move highlights the apex bank’s intention to avoid long-term debt accumulation while balancing the government’s financial needs.
Contrary to the National Assembly’s push for a 10 percent borrowing cap, the CBN’s decision reflects its cautious approach toward expanding fiscal deficits and ensuring stricter financial discipline.
Analysts believe that this conservative stance may signal the CBN’s concerns about inflationary pressures and the country’s growing debt profile, despite the legislative approval for higher borrowing.
The policy also reinforced the continued operation of the Treasury Single Account (TSA), a key public financial management reform tool.
The TSA consolidates all Federal Government accounts into a single system linked to the Consolidated Revenue Fund (CRF), allowing the government to monitor its cash position more effectively.
For the 2024-2025 fiscal years, Ways and Means Advances will be determined after accounting for the sub-accounts of various Ministries, Departments, and Agencies (MDAs) under the TSA framework.
The CBN, in collaboration with the Office of the Accountant General of the Federation (OAGF), aims to improve TSA operations, ensuring efficient liquidity management and minimizing financial leakages across government departments.
Interest rates in the upcoming fiscal years will continue to be influenced by market conditions, with the CBN adjusting its Monetary Policy Rate (MPR) as necessary.
The guidelines stipulate that banks will offer negotiated interest rates on current and savings account deposits. For special-purpose deposits held as collateral, the interest rate will be no less than 30% of the MPR for naira-denominated deposits, ensuring that depositors receive a competitive return on their funds.
Furthermore, the CBN’s guidelines extend flexibility to foreign currency-denominated deposits, with interest rates being negotiable between banks and customers.
This structure reflects the CBN’s broader efforts to ensure alignment between market dynamics and the regulatory framework governing the financial system.
