The Central Bank of Nigeria (CBN) has announced that it will maintain its Ways and Means Advances to the federal government at a 5% limit of the previous year’s revenue for the fiscal years 2024-2025.
This policy is outlined in the newly released “Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines” for the upcoming fiscal years.
According to the guidelines, the CBN will continue to provide financial support to the federal government through Ways and Means Advances, a mechanism that allows the government to cover budget deficits.
However, the CBN emphasized that the advances would be capped at 5% of the actual revenue collected by the government in the preceding year, reinforcing the need for fiscal discipline.
The CBN further stipulated that these advances are intended to be short-term and should be repaid by the end of the fiscal year in which they are granted.
The bank’s policy aims to ensure that the government does not overly rely on this mechanism to finance budgetary operations, encouraging better fiscal management and limiting excessive borrowing.
The policy comes amidst efforts to balance the country’s budget deficit and stabilize its economy, with the CBN reaffirming its commitment to prudent monetary management.
This move is seen as part of broader economic reforms aimed at improving fiscal responsibility while providing the necessary support for government spending.
As Nigeria faces economic challenges such as inflation, debt, and fluctuating oil revenues, the CBN’s decision to maintain the 5% cap signals its intent to manage monetary supply cautiously while allowing for strategic government borrowing to support budgetary needs.