The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has said that the federal budget cannot be sustained by the Ways and Means advances from the Central Bank of Nigeria.
The Minister made this statement on Monday at the National Economic Summit in Abuja.
According to Edun, monetary policy instruments are not meant to fund fiscal deficit, stating that the present administration is addressing the imbalances between both sides of the economy.
He said,
- “Mr. President is somebody that believes in the rule of law, that includes respecting the autonomy of the central bank both in the letter and the spirit.
- However, it is one government and at the end of the day, foreign exchange belongs first and foremost to the federal government not to the central bank.
- “In terms of stabilization, the other area is getting the hand of the fiscal deficit making sure that the deficit is reduced, the deficit is funded in a conventional way and that means dealing with ways and means.
- “Ways and Means is essentially outside the law and it is not a sustainable way to be funding federal budget.
- Those are the areas the government has a plan is coherent and that will provide the basis for investment, and growth,” he added.
FX Market Reforms and Digitalization
Responding to questions on the current foreign exchange crisis, the finance minister confirmed that the government is working to ensure ease of transaction and access in the foreign exchange market.
He stated that the system will be simplified and digitized to ensure transparency and promote liquidity in the market.
- “There is a revamping of the FX market. The FX market will be simplified, digitized, and will be reformed such as all legal and legitimate transactions will fall within the purview of the authorities of the formal market.
- Anything outside that will be illegal, criminal and punished. If you want to pay school fees and health bills, it will be simplified in such a way that you will be able to provide perhaps an identity such as BVN, NIN and you’ll do your transaction,” he added.
Furthermore, Edun revealed that the President recently signed two executive orders to effectively and legally allowed the inflow of supply of foreign exchange from the domestic market into the formal banking system.
He stated,
- “Mr. President announced that he had taken measures to deal with the illiquidity in the foreign exchange market which we know is very problematic at this time.
- “The market is illiquid because there is not enough supply of FX. The solution the president has put on the table is that he has signed an executive order that effectively and legally allowed all the cash that is in the domestic economy to come into the formal monetary supply.
- People will be able to take the cash that they have and put it inside the system along with that there is another executive order that allows the domestic issuance of foreign currency so that they’ll have an incentive to provide that foreign exchange from whatever source into income bearing instrument.”
What You should Know
Ways and Means is a loan facility through which the CBN finances the government’s budget shortfalls.
Section 38 of the CBN Act, 2007, stipulates that the total amount of Ways and Means Advances outstanding shall not at any time exceed 5 percent of the previous year’s actual revenue of the federal government.
Presently, Nigeria ways and means loan stands around N22.7 trillion, raising a lot of questions on the legitimacy of the statutory limit of the loan.
