The Central Bank of Nigeria (CBN) recorded a significant decline in interest income from the Federal Government’s Ways and Means advances in 2024, earning just N3.1 billion, a sharp drop from the staggering N1.6 trillion earned in 2023.
This development, revealed in the apex bank’s 2024 audited financial statements, highlights a strategic shift in Nigeria’s fiscal and monetary coordination as the federal authorities aim to curb inflation and reduce their dependence on central bank overdrafts.
The interest income is classified under “loans and receivables” and reflects the charges on temporary overdraft facilities provided by the CBN to the Federal Government. The facility, known as Ways and Means, allows the government to access short-term funding directly from the central bank to bridge budgetary shortfalls. However, this practice has come under intense scrutiny in recent years.
According to the CBN, the interest rate applied to these overdrafts was the Monetary Policy Rate (MPR) plus three percentage points, in line with established guidelines.
The steep 99.8% drop in interest income follows the Federal Government’s securitisation of N22.7 trillion in Ways and Means advances in 2023. This controversial move involved converting the overdraft into 40-year bonds with a three-year moratorium. The measure, approved by the National Assembly, was intended to enhance fiscal transparency and stabilise the CBN’s balance sheet.
In June 2024, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, confirmed that the government had repaid N7.3 trillion of the securitised debt. He further stated that all government spending was now executed through more transparent mechanisms and that the era of routinely relying on CBN overdrafts for debt servicing was over.
Meanwhile, CBN Governor Mr. Olayemi Cardoso told lawmakers that the central bank would no longer provide overdraft facilities to the Federal Government until existing balances were completely cleared. This marks a fundamental shift in monetary policy and reinforces the bank’s commitment to controlling inflation and ensuring fiscal discipline.
The use of Ways and Means is legally supported by Section 38 of the CBN Act, 2007, which permits the central bank to grant temporary advances to the Federal Government in times of revenue shortfall. However, the law imposes strict limits, and critics argue that these limits have often been breached.
In 2023, former CBN Governor Godwin Emefiele came under fire after allegedly approving N22.7 trillion in overdrafts without National Assembly approval during the Buhari administration. Analysts and civil society groups accused the CBN of compromising its independence and fuelling inflation through unchecked monetary expansion.
Moreover, a 2021 report by the Office of the Auditor-General of the Federation flagged N2.73 trillion in interest payments as potentially misappropriated, alleging that the apex bank lacked transparency and treated the facility as a loan for its own benefit.
Economists have long warned that the unchecked use of Ways and Means undermines the effectiveness of monetary policy and poses inflationary risks. The drastic reduction in the CBN’s interest earnings suggests that the Federal Government is now taking deliberate steps to streamline public borrowing and reduce its impact on macroeconomic stability.
Financial analysts view the development as a welcome indicator of improved fiscal discipline, especially in the wake of rising inflation, currency volatility, and the ongoing challenges of public debt management.
With the CBN’s firm stance against further overdrafts and the Finance Ministry’s commitment to accountability, Nigeria appears to be charting a new course in its public finance management strategy.