The amount of money borrowed by the Federal Government from the Central Bank of Nigeria through Ways and Means Advances rose from N17.46tn in December 2021 to N19.91tn in June 2022.
Data from CBN shows that FG borrowed N2.45tn from the apex bank in a space of six months.
The N19.91tn owed the apex bank by the Federal Government is not part of the country’s total public debt stock, which stood at N41.60tn as of March 2022, according to the Debt Management Office.
Ways and Means Advances is a loan facility through which the CBN finances the shortfalls in the government’s budget.
Section 38 of the CBN Act, 2007, allows FG to take temporary advancement from CBN at such rate of interest as the bank may determine.
The act reads on part: “The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.
“All advances shall be repaid as soon as possible and shall, in any event, be repayable by the end of the Federal Government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.”
However, the CBN has stated via it’s website that the FG borrowing through the Ways and Means Advances could have adverse effects on the bank’s monetary policy.
“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.
This article was originally published on Naija News