The Federal Government, as per the Q1, 2023 Budget Implementation Report from the Budget Office of the Federation, incurred a substantial interest payment of N912.32 billion during the first quarter of 2023 for loans acquired through Ways and Means Advances from the Central Bank of Nigeria.
This figure represented a staggering 161.47 percent increase compared to the N348.92 billion spent in the same quarter of the previous year, 2022.
The government had initially budgeted to allocate N1.2 trillion to service these CBN loans through Ways and Means Advances, translating to approximately N300 billion on a quarterly basis.
However, it became evident that the government had already expended about 76.03 percent of its yearly budget allocation for interest payments on these advances.
Ways and Means Advances serve as a financial tool employed by the central bank to assist the government during temporary budgetary shortfalls, within legal limits defined by Section 38 of the CBN Act, 2007.
This section stipulates that the central bank can extend temporary advances to the Federal Government at interest rates determined by the bank, not exceeding five percent of the previous year’s actual government revenue.
Such advances must be repaid promptly, no later than the end of the government’s financial year, and if unpaid, the central bank’s authority to grant further advances in subsequent years is restricted.
It’s worth noting that the prior administration had consistently exceeded this five percent borrowing limit, but the 9th National Assembly, amidst public outcry, modified the CBN Act to raise the Ways and Means Advances ceiling from five to 15 percent of the previous year’s government revenue.
Both the House of Representatives and the Senate approved this amendment in emergency sessions, addressing concerns about the government’s excessive use of Ways and Means Advances.
