CBN Won’t Give Ways And Means To FG Until… -Cardoso
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has said that the apex bank will no longer give Ways and Means to the Federal Government until the previous loans are repaid.
Ways and means is the money that the CBN lends to the Federal Government in the meantime to augment spending based on the time the revenue is generated.
Cardoso on Friday alongside the economic team met with the Senate Committees on Finance, Appropriations, Banking, Insurance, and Other Financial Institutions.
The Senate had summoned the economic team including the CBN governor, Minister of Finance, Wale Edun; the Minister of Budget and Economic Planning, Atiku Bagudu, the Minister of Agriculture, Abubakar Kyari to address the current economic situation and more importantly, the free fall of the Naira and hike in prices of food.
The CBN governor said, “On our side at the CBN, we have responded with significant monetary policy tightening to reign in inflationary pressure.
“Empirical analysis has established that money supply is one of the factors fueling the current inflationary pressure. For instance, an analysis of the trend of the money supply spanning over nine months shows that M3 increased from N52.01tn in January 2023 to N68.25tn in November 2023 representing N16.24tn or 31.22 percent increase over the period.
“Increase in Net Foreign Asset following the harmonisation of exchange rates and the N3.22tn ways and means advances were the major factors driving the increase in the money supply.”
He further explained, “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 five percent of the previous year’s revenue.
“We have also halted quasi-fiscal measures of over N10tn 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.”
He reiterated, “The CBN’s adoption of the 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.”
Cardoso further stated that its efforts were beginning to yield results to ease the economic situation in the country.
He said, “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.
“Distinguished Senators, 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 in the medium term, aided by improved agricultural productivity and easing global supply chain pressures.”
Cardoso while addressing the issues said, “Distinguished Senators, these measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass-through to domestic inflation.
“Indeed, they have already started yielding early results with significant interest from Foreign Portfolio Investors that have already begun to supply the much-needed foreign exchange to the economy.
“For example, upwards of $1bn in the last few days came in to subscribe to the Nigeria Treasury Bill auction of N1tn which saw an oversubscription earlier this week.”
Cardoso added, “Our measures aimed at improving USD supply into the Nigerian economy, have significant potential in taming the volatility of the exchange rates. However, for these measures to be sustainable, we must as a country, moderate our demand for FX.”
Meanwhile, on addressing the issue of the free fall of the Naira in exchange for the US dollar and other hard foreign currencies, the CBN governor has advised Nigerians to reduce their quest for dollars, consumption, and usage of foreign goods.
He emphasized that without moderation of demands on USD, the CBN has no magic wand to hurriedly get Naira stabilized.
