The federal government has paid interest of N405.93 billion from January 2022 to April 2022 on the loans it got from the Central Bank of Nigeria (CBN) through the Ways and Means advances, statistics from government’s Medium Term Strategy paper has disclosed.
Ways and Means Advances is a loan facility used by the central bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.
However, there was no budgetary allocation for it in the 2022 budget.
Previously, the Federal Government spent N912.57 billion in 2020 and N1.12 trillion from January to November last year on interest on Ways and Means Advances, despite the lack of budgetary allocation for it in the budgets.
According to data obtained from the government’s Medium-Term Expenditure Framework and Fiscal Strategy Paper 2023-2025, the CBN 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 monetary base leading to adverse effect on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy,” it said.
The World Bank, in November last year, warned the Nigerian government against financing deficits by borrowing from the CBN through the Ways and Means Advances, saying this often put fiscal pressures on the country’s expenditures.
