Data shows that Nigeria’s federal government borrowed ₦4.36 trillion from the Central Bank of Nigeria (CBN) as of June, a month after the previous president securitized a significant portion of the total debt. This borrowing comes from the Ways and Means Advances facility, used by the CBN to finance the government in times of temporary budget shortfalls. This amount surpasses the stipulated limit, raising concerns about the sustainability of Nigeria’s public finances.
Key Points:
- The federal government’s borrowing from the CBN stands at ₦4.36 trillion as of June, exceeding the stipulated limit of five percent of the previous year’s actual revenue.
- The debt owed to the CBN surged to ₦26.95 trillion in May before securitization.
- In addition to securitization, the devaluation of the naira in June also contributed to the increase in public debt.
- The National Assembly amended the CBN Act to increase the amount the federal government can borrow from the central bank in a year to 15 percent of the previous year’s revenue, but this amendment has not yet been signed into law.
- Monetization of the fiscal deficit through expensive Ways and Means Advances has weakened the effectiveness of monetary policy and contributed to high inflation, according to the World Bank.
Impact: The data highlights concerns about Nigeria’s public finances and the sustainability of its current borrowing practices. It underscores the need for careful fiscal management and adherence to legal limits on borrowing to ensure long-term economic stability.
