The Federal Government has increased its total borrowing from the Central Bank of Nigeria (CBN) to N19.01 trillion, according to official data collated by TechEconomy.
The Federal Government used the “Ways and Means Advances” method to borrow from the CBN. The figures rose from N17.46 trillion as of December 2021 to N19.01tn as of April 2022, according to data from the apex bank.
The figure represents an increase of N1.55 trillion within the first four months of 2022.
Ways and Means Advances are loan facilities used by the central bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.
The N19.01 trillion owed to the apex bank by the Federal Government is not part of the country’s total public debt stock, which stood at N41.60 trillion as of March 2022.
The public debt stock only includes the debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory.
Section 38 of the CBN Act, 2007, said the apex bank may grant temporary advances to the Federal Government with regard to temporary deficiency of budget revenue at such rate of interest as the bank may determine.
” The act said, “The total amount of such outstanding advances shall not at any time exceed five percent of the previous year’s actual revenue of the Federal Government,” the CBN Act noted.
“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.”
The CBN has said on its website, however, warns 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 a report in November last year, noted that the Federal Government’s recourse to CBN’s overdraft facility had repeatedly exceeded the limit of five percent of the previous year’s fiscal revenues.
It said the government continued to draw on the facility in 2020, with borrowing from the central bank amounting to around 80 percent of the previous year’s fiscal revenues.
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