The Central Bank of Nigeria (CBN) has reduced its Ways and Means advances to the Federal Government by 59 percent, signalling a new phase of fiscal discipline under the leadership of Governor Olayemi Cardoso. This move is one of several steps being taken to reduce the country’s dependence on central bank borrowing and bring more stability to Nigeria’s fragile economy.
Ways and Means advances are short-term loans that the CBN gives to the Federal Government to cover urgent budget gaps. But experts have warned that too much of such borrowing can cause inflation and weaken the naira. The CBN Act of 2007 says these advances should not go above 5 percent of the previous year’s revenue, a rule that has often been overlooked in the past.
Fresh data now shows that the total Ways and Means advances dropped from ₦7.94 trillion at the end of 2023 to ₦3.27 trillion in 2024. This is a sharp reduction of about ₦4.68 trillion. Financial analysts say this cut is a major signal that the CBN is serious about tightening its policies and restoring confidence in the financial system.
Governor Olayemi Cardoso has made it clear that the apex bank will no longer provide further advances to the Federal Government until the outstanding balance is fully paid. He said the CBN is focusing on restoring macroeconomic stability and cleaning up its balance sheet to make Nigeria more attractive to investors.
In 2023, the National Assembly approved the conversion or securitization of ₦22.7 trillion in previous Ways and Means loans into long-term debt. While this gave the government breathing space in the short term, it added to Nigeria’s growing public debt, which is now a major source of concern for local and international observers.
Economic experts have welcomed the CBN’s move, saying it could help reduce inflation, which has remained stubbornly high in recent times. They point out that central bank overdrafts have a way of increasing money supply and pushing up prices, which affects ordinary Nigerians who are already battling with the high cost of living.
However, they also warned that cutting Ways and Means alone will not solve Nigeria’s fiscal problems. The government must also improve how it raises revenue and reduce wasteful spending. Some experts noted that if the government cannot borrow from the CBN, it might be forced to borrow more from local or international lenders, which could mean higher interest payments in the future.
The reduction in CBN financing comes at a critical time. Nigeria is facing serious economic challenges including rising inflation, unstable exchange rates, and slow economic growth. The Federal Government has been trying to push reforms, including subsidy removal and exchange rate unification, but these policies have caused hardship for many Nigerians.
Governor Cardoso has insisted that the CBN will stay committed to its core mandate of maintaining monetary and price stability. He has also called on the Federal Government to embrace stronger fiscal reforms that will reduce reliance on short-term borrowing and encourage more productive spending.
For now, stakeholders in the financial sector say the reduction in Ways and Means is a good first step, but they are watching to see if the government will follow up with deeper structural reforms.
