Why CBN lent N22.8 trillion in “Ways and Means” to the FG – Emefiele

The apex bank governor Godwin Emefiele has explained why it has continued to extend overdraft credits to the federal government via a policy termed “Ways and Means”.

Nairametrics had reported severally that the ways and means figures as more than doubled since 2015 hitting an all-time high of N22.8 trillion as of September 2022.

Emefiele explained that the reason why the apex bank continues to support the government through ways and means is part of its responsibility as the lender of last resort to the country.

What Emefiele is saying

According to Godwin Emefiele, “the central bank is a banker to the government and also a lender of last resort to the government” making it responsible for back-stopping the government in times of need.

Godwin Emefiele cited a drop in oil prices, two recessions, and the covid-19 pandemic as a combination of economic challenges that decimated the revenues of the government.

• According to him “because we are lender of last resort, it will be irresponsible for us to sit idle, it will be a dereliction of our duty as the lender of last resort to ignore the government and allow the economy and Nigerians to suffer.”

He also stated that what they did is not new claiming other central banks around the world do similar when faced with an economic crisis.

• “What we did by lending to the government as lender and banker of last resort is normal in any part of the world particularly when countries face crises. Any central bank, any FED will do what we have done.”
• “So that we appeal to those who are exaggerating the purpose behind ways and means to take it easy with us and believe that by the special grace of God that since the president has written to the national assembly, we will eventually give the approval to allow CBN to securitize” the loans.

Senate not approving to legalize Ways and Means

Meanwhile, the Nigerian Senate said it stood down a restructure of the N22.8 trillion Ways & Means loans because it did not get sufficient information necessary enough to make a decision.

This was disclosed late last year by Senate President Ahmad Lawan, after the passing of the 2023 national budget of about N21.8 trillion. Lawan added that a committee has been set up to collect the necessary information on the issue.

• “We have stood down the consideration of the Ways and Means Restructure. We did so as a Senate, as a body, because we didn’t get the kind of information that we consider necessary and important for us to take a major decision like this, without any let or hindrance.
• “We have set up a special committee headed by the Senate Leader and in the membership, you have the committees of Finance, Appropriation, Foreign and Local Debts, and Banking to collect all the necessary information

Ways and Means

The ways and means provision allows the government to borrow from the Apex Bank if it needs short-term or emergency finance to fund delayed government expected cash receipts of fiscal deficits.

• Provisions in the act cap monetary financing of fiscal deficits at 5% of the prior year’s revenues.
• However, since the government started experiencing a significant shortfall in revenue, it has relied heavily on the central bank to finance its expenditure programs via Ways and Means.
• The latest data suggest the total amount is now N22.8 trillion and is not the second largest single debt owed by the federal government.