THE Nigerian Federal Government’s borrowings from the Central Bank of Nigeria (CBN) through Ways and Means Advances hit N1.83 trillion in the first quarter of 2023.
This pushed Federal government’s borrowings from the CBN to N25.36 trillion in March 2023, from N23.53 trillion in December 2022, as disclosed in provisional data from the apex bank through its quarterly statistical bulletin.
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The Ways and Means Advances is a loan facility a central bank offers the government to finance temporary budget shortfalls, subject to limits imposed by law.
Rising debts and debt servicing have remained a huge problem to Nigeria’s economy. According to a World Bank report, the Federal government uses over 90 per cent of its revenue to service debts. The development, economic experts say, does not augur well for funding of key infrastructural projects in the country.
To worsen the situation, the Federal government’s unification of exchange rates has resulted in the rise of the national debt to N82 trillion.
Economic watchers had kicked against the apex bank’s lending to the Federal government because of what they regarded as its dire consequences on inflation.
According to Section 38 of the CBN Act, 2007, 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 section declares that in the event of a revenue shortfall, the CBN must not lend to the Federal government an amount more than 5 per cent of the previous year’s revenue of the government.
That section of the CBN Act aims to prevent the overreliance of the Federal government on CBN financing, instead of opening up the economy to boost domestic investments and attract foreign direct investments.