FG borrows additional N3.8 trillion from CBN in 6 months. The Federal Government of Nigeria received an additional N3.8 trillion through what seems to be fresh Ways and Means Borrowing in the latter half of 2023, as per provisional data disclosed in the latest statistics bulletin for the fourth quarter of 2023 recently released by the Central Bank.

The data from the Central Bank of Nigeria (CBN) indicates that the total amount increased from N4.4 trillion at the end of June 2023, bringing the cumulative Ways and Means balances owed by the government to N8.2 trillion as of December 2023. This occurred despite assertions from the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, suggesting that President Bola Tinubu’s administration had not borrowed from the CBN.

Ways and Means provisions function as a mechanism for the government to obtain short-term or emergency financing from the CBN to address cash flow shortages. Total Ways and Means balances stood at N26.95 trillion as of May 2023 when the Tinubu administration commenced. However, these balances were securitized and included as part of the federal government’s domestic debt profile.

A closer examination of the data reveals that the balance at the end of June 2023 was N4.36 trillion, possibly indicating that balances from the preceding month were transferred to the Debt Management Office. Subsequently, the balances increased each month from July 2023 onwards, reaching N8.21 trillion by December 2023, marking an 88% increase over six months.

Regarding the breakdown of the data, in July, the balance rose to N4.5 trillion, followed by N5.1 trillion in August, crossing the N5.1 trillion mark for the first time. In September, the total increased to N6.4 trillion, representing the largest single-month borrowing of about N1.3 trillion. It further climbed to N7.2 trillion in October before marginally rising to N7.6 trillion in November.

It's notable that the federal government obtained approximately N2.94 trillion from the CBN through Ways and Means Advances, earmarked for servicing its domestic debts. Additionally, around N4.83 trillion from the proceeds of Nigerian Treasury Bills (NTBs) and Bonds issued in 2024 was allocated to settle the Ways and Means Advances from the CBN.

Last year, the National Assembly approved the securitization of N22.7 trillion of the N23.3 trillion previously advanced by the CBN to the Federal Government through ways and means. This debt was then transferred to the Debt Management Office (DMO) with a 40-year tenor, a 3-year moratorium, and an interest rate of 9%.

Regarding the Ways and Means Act, Section 38 of the CBN Act, 2007 allows the apex bank to provide temporary advances to the Federal Government for temporary revenue shortfalls at an interest rate determined by the bank. Amendments to the CBN Act by the National Assembly raised the ceiling of Ways and Means Advances from five to 15% of the Federal Government’s previous year’s revenue. However, this increase may lead to more borrowing and increased debt service obligations for the country. Moreover, the Senate of the 10th assembly approved the securitization of the outstanding N7.3 trillion in Ways and Means, which is expected to significantly reduce the recorded figure in December.