The Central Bank of Nigeria (CBN) reported a staggering decline in interest income from the federal government’s overdraft facility, earning just N3.1 billion in 2024 compared to N1.6 trillion in 2023, according to the bank’s audited financial statements.
This dramatic drop signals a seismic shift in Nigeria’s fiscal and monetary policy landscape, as the government moves to curb its long-standing dependence on the controversial Ways and Means facility—a short-term overdraft provided by the CBN to bridge fiscal gaps.
The interest income, categorized under “loans and receivables” in the CBN’s 2024 financials, has been a lightning rod for criticism due to its role in fueling inflation and undermining monetary policy.
The interest income, which is calculated at the monetary policy rate plus three percentage points, reflects the reduced scale of the overdraft following significant policy reforms.
The CBN’s financials explicitly note: “Included in interest income on loans and receivables is interest income on overdraft facility granted to the Federal Government, amounting to N3.1bn (2023: N1.6 The drastic reduction in interest income stems from the federal government’s 2023 decision to securitize N22.7 trillion of outstanding Ways and Means debt, converting it into 40-year bonds with a three-year moratorium.
This move, approved by the National Assembly, aimed to mitigate the inflationary pressures of the overdraft and bolster the CBN’s balance sheet. In June 2024, Finance Minister Wale Edun announced that the government had repaid N7.3 trillion of this securitized debt, marking a significant step toward fiscal discipline.
The CBN, under Governor Olayemi Cardoso, has taken a firm stance against further overdrafts, with Cardoso informing lawmakers that no new advances would be granted until all outstanding balances are cleared.
This policy shift aligns with broader efforts to restore transparency and accountability in government spending. Edun emphasized that the government has ceased using the overdraft for debt servicing, opting instead for a more structured fiscal framework.
Section 38 of the CBN Act of 2007 allows the apex bank to provide temporary advances to cover budget shortfalls. However, its overuse has drawn sharp criticism from analysts and civil society groups, who argue it blurs the line between fiscal and monetary policy, exacerbating Nigeria’s inflationary woes.
In 2023, the facility became embroiled in scandal when it was revealed that former CBN Governor Godwin Emefiele had allegedly authorized N22.7 trillion in advances to former President Muhammadu Buhari’s administration without National Assembly approval. The move sparked outrage, with accusations of mismanagement and lack of oversight.
Further controversy emerged in 2021 when the Office of the Auditor-General of the Federation flagged N2.73 trillion in allegedly misappropriated interest payments by the CBN. The Auditor-General accused the bank of treating the facility as a loan for its own benefit, lacking proper documentation or transparency—a charge that deepened public distrust in the facility’s management.
The CBN’s reforms also carry implications for its own financial health. The N1.6 trillion in interest income in 2023 accounted for a significant portion of the bank’s revenue, and the 2024 drop to N3.1 billion could strain its operational capacity.
However, Governor Cardoso has prioritized long-term monetary stability over short-term gains, signaling a broader restructuring of the CBN’s role in fiscal policy.
WHAT YOU SHOULD KNOW
CBN faces mounting pressure to maintain discipline while addressing public demands for economic relief. The repayment of N7.3 trillion in securitized debt and the halt on new overdrafts are significant milestones.
Civil society groups, including the Budget Transparency Network, have called for stricter oversight and legislative reforms to prevent future abuses of the facility.
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