CBN Stops Granting Loans To FG

The federal government would no longer be receiving loans from the Central Bank of Nigeria (CBN), the bank declared.

The decision was made, according to CBN Governor Olayemi Cardoso, because the federal government had not paid off its outstanding debt. She made this statement during an interactive session with the Senate Committee on Banking, Insurance, and Other Financial Institutions, which also included the Minister of Finance and Coordinating Minister for the Economy, Olawale Edun, the Minister of Budget and National Planning, Atiku Bagudu, and the Minister of Agriculture, Abubakar Kyari.

As of June 2023, the federal government was borrowing N4.36 trillion from the CBN, one month after former President Muhammadu Buhari securitized N22.7 trillion from the central bank.

In violation of the CBN Act, the outstanding debt of N4.36 trillion is considerably more than 5% of the federal government’s projected revenue of N8.8 trillion for 2023.

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Cardoso said; “I am pleased to note the Fiscal Authorities efforts in discontinuing ways and means advances. This is also in compliance with Section (38) of the CBN Act (2007), the Bank is no longer at liberty to grant further ways and means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled. The Bank must strictly adhere to the law limiting advances under ways and means to 5 percent of the previous year’s revenue.

“We have also halted quasi-fiscal measures of over 10 trillion naira by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess Naira and raising prices to the levels of Inflation we are grappling with today.

“The CBN’s adoption of inflation-targeting framework involves clear communication and collaboration with fiscal authorities to achieve price stability, potentially leading to lowered policy rates, stimulating investment, and creating job opportunities.

“Our MPC meeting on the 26th and 27th of February is also expected to review the situation and take further decisions on these important issues.

“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 percent at the medium term, aided by improved agricultural productivity and easing global supply chain pressures”.