Through Ways and Means Advances, the Federal Government borrowed N1.46 trillion from the Central Bank of Nigeria in August 2022.Infomation Guide Nigeria

A total of N22.07 trillion was borrowed by the FG from the CBN in August 2022, up from N20.61 trillion in July 2022.

The CBN reports that between January and August, the Federal Government borrowed a total of N4.61 trillion from the central bank.

The Federal Government owes the Apex Bank N22.07 trillion, which is separate from the country’s overall public debt stock, which the Debt Management Office estimates to be N42.84 trillion as of June 2022.

The Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory are the only entities whose debts are included in the public debt stock.

The CBN finances the budgetary gaps in the government through a borrowing instrument called Ways and Means Advances.

In accordance with Section 38 of the CBN Act, 2007, the apex bank may make short-term advances to the federal government in the event of a temporary shortfall in budgetary revenue at an interest rate that the bank deems appropriate.

“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.”

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The CBN has stated on its website, however, that the Federal Government’s borrowing from it through the Ways and Means Advances may negatively impact the bank’s monetary policy, which might harm 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 had advised the Nigerian government against funding deficits by borrowing from the CBN through the Ways and Means Advances in November of last year, claiming that this placed fiscal pressure on the nation’s expenditures.

Despite recommendations from experts and groups, the Federal Government has continued to borrow money from the CBN to cover budget deficits.

With “liquidity that has no productivity attached to it coming into the system,” according to Mr. Johnson Chukwu, managing director and chief executive officer of Cowry Asset Management Limited, central bank lending pressures the currency rate and inflation rate.

Dr. Aliyu Ilias, a development economist, criticised the government for relying too much on borrowing, saying that this was bad for the economy.Jamb Result 

In addition, he asked the government to stop borrowing so much and find more effective ways of raising money.

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