IMF tells CBN to stop full financing of FG’s fiscal deficits

Ima Elijah 09:59 - 09 February 2023

FILE PHOTO: The International Monetary Fund (IMF) headquarters building is seen ahead of the IMF/World Bank spring meetings in Washington, U.S., April 8, 2019. REUTERS/Yuri Gripas/File Photo

Ways and Means is a loan facility through which the CBN finances the government’s budget shortfalls.

The International Monetary Fund (IMF) has urged the Central Bank of Nigeria (CBN) to go beyond recent increases in the policy rate to implement additional actions, including fully sterilising the apex bank’s financing of fiscal deficits under its Ways and Means window as well as phasing out other credit intervention programmes.

What you should know: Ways and Means is a loan facility through which the CBN finances the government’s budget shortfalls.

Recall: CBN Governor, Godwin Emefiele on January 24, 2023. The Central Bank of Nigeria (CBN) had raised the Monetary Policy Rate (MPR), which measures interest rates from 16.5% to 17.5 percent to tame inflation.

The IMF observed recent increases in the policy rate, but encouraged the CBN to stand ready to further increase the policy rate if needed, and to implement additional actions, including fully sterilising central bank financing of fiscal deficits and phasing out credit intervention programmes.

The multilateral lender also called on the Nigerian authorities to speed up action in finalising the moves to securitise the N23.8 trillion overdrafts extended by the CBN to the federal government to finance annual fiscal deficits.

Zainab Ahmed, minister of finance, budget and national planning, had explained that the CBN’s overdraft would be issued in the form of bonds and treasury bills to be offered for subscription by investors.

What Nigeria owes CBN (Ways and Means): The data, obtained from CBN’s website, showed that the Ways and Means’ debt climbed from N17.5 trillion in December 2021 to N23.8 trillion in October 2022 — an increase of N6.3 trillion in 10 months.

Analysis by Pulse shows that the federal government, in 2022, borrowed N704.3 billion from the CBN in January, N226.3 billion in February, N507.7 billion in March, and N112.3 billion in April.

It also borrowed N569.6 billion in May, N335.8 billion in June, N695.2 billion in July, N1.46 trillion in August, N749.4 billion in September, and N957.2 billion in October.