We’ll continue -ways and means’ loan to FG at 5% – CBN

The Central Bank of Nigeria (CBN) has said it will sustain its ways and means advances to the federal government at a 5% limit for the 2024/2025 fiscal year.

Ways and Means Advances allow the CBN to provide short-term loans to cover government budget deficits.

Although, a recent bill passed on July 31, by the National Assembly proposed increasing the percentage of Ways and Means loans to the federal government from 5% to 10%, THEWILL recalls that CBN Governor, Olayemi Cardoso, had said at a Senate Committee meeting in February 2024, that the apex bank would cease providing new Ways and Means Advances until existing loans were repaid.

However, in its Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2024-2025 document released on Tuesday, the CBN reiterated that “Ways and Means Advances shall continue to be available to the Federal Government to finance deficits in its budgetary operations to a maximum of 5.0 percent of the previous year’s actual collected revenue”.

It, however, added that “such advances shall be liquidated as soon as possible and shall in any event be repayable at the end of the year in which it was granted”, and noting that “consistent with the banking arrangement of Treasury Single Account (TSA), Ways and Means Advances would now be determined after recognising the sub-accounts of the various MDAs, which are now linked to the Consolidated Revenue Fund (CRF) to arrive at the FGN consolidated cash position.”

The bank also informed that its ways and means advances to the Federal Government to finance deficits in its budgetary operations remains a maximum of 5.0 percent of the previous year’s actual collected revenue.

The Policy guidelines also maintained that the bank shall continue to influence interest rates indirectly, through the adjustment of its anchor rate, the Monetary Policy Rate (MPR).

“Accordingly, interest rates used by banks in the 2024/2025 fiscal years shall comply with the following guidelines, including, that banks shall continue to pay negotiated interest rates on current account deposits at the instance of the customer.

“Banks shall continue to pay negotiated interest rates on savings account deposits as provided in Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions, or any other policy, circular or guideline that may be issued by CBN from time to time.

“Where special-purpose deposits (such as deposits held as collateral or other similar deposits) are held, banks shall pay interest at a rate negotiated with the customer, subject to a minimum of 30.0 percent of MPR per annum for naira denominated deposits”, the policy guidelines stated, adding that the applicable interest rate on foreign currency denominated deposits held as collateral shall be negotiable.

The new guidelines also said the bank will implement an explicit inflation targeting framework to enhance the effectiveness of monetary policy during the period.

According to the guideline, “To complement the new inflation targeting environment, CBN will continue to monitor the growth in monetary aggregates to ensure that it remains consistent with the inflation objective of the Bank. In addition, short-term interest rates will be monitored to avoid volatility with the goal of anchoring expectations in the financial markets.”

It said the 2024/2025 Guidelines coincide with the unification of the naira exchange rate windows to align the exchange rate with market realities, curtail unnecessary demand pressure and activities of speculators. THEWILL