FG borrows additional N3.8 trillion from CBN in 6 months

The Federal Government (FG) has borrowed another 3.8 trillion naira from the Central Bank of Nigeria (CBN) in 6 months through the Ways and Means provision.

The Ways and Means provision is a mechanism that helps FG to get short-term or emergency financing from the CBN to solve cash flow problems.

Total Ways and Means balances as of May 2023 when the Tinubu administration took over was N26.95 trillion.

An analysis of the data shows the balance at the end of June 2023 was N4.36 trillion showing that the prior month balances may have been moved to the Debt Management Office.

From July 2023 however, the balances rise every month, first to N4.5 trillion in July, then N5.1 trillion in August, crossing the N5.1 trillion mark for the first time.

By September, the total was N6.4 trillion, representing the single largest additional borrowing for a month with about N1.3 trillion.

In December 2023, the total hit N8.21 trillion, showing that Ways and Means increased by 88% in 6 months.

About the Ways and Means Act

The Ways and Means Act empowers the CBN to provide temporary financial support to the federal government by issuing advances or loans for a limited period. This funding is intended to bridge any short-term gaps in the government's cash flow and facilitate smooth fiscal operations.

Key provisions

Limits and conditions: The act specifies limits on the amount of financing that can be extended by the CBN to the federal government and imposes conditions on the use of these funds.

Interest rates: It may outline the interest rates applicable to the advances provided, ensuring that any financial support is extended under terms that are fair and transparent.

Repayment obligations: The act likely sets out the terms and timeline for repayment of the advances. This ensures that the financing remains temporary and does not morph into a long-term borrowing arrangement.

BEB