The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has said that the apex bank will no longer give Ways and Means to the President until the previous loans are repaid.
Olayemi noted that it was one of the measures taken by the apex bank to curtail the economic downturn currently plaguing the country.
Ways and Means is the money that the Central Bank of Nigeria lends to the Federal Government in the meantime to augment spending based on the time the revenue is generated.
Under the previous administration, the then CBN governor, Godwin Emefiele, without approval from the National Assembly, allegedly printed the sum of N22.7tn for former President Muhammadu Buhari under Ways and Means.
Cardoso on Friday alongside with the economic team met with the Senate Committees on Finance, Appropriations, Banking, Insurance and other Financial Institutions.
The Senate had summoned the economic team including the CBN governor, Minister of Finance, Wale Edun; the Minister of budget and Economic Planning, Atiku Bagudu; the minister of Agriculture, Abubakar Kyari, to address the current economic situation and more importantly, the free fall of the naira and hike in prices of foodstuffs.
The CBN governor said, “On our side at the CBN, we have responded with significant monetary policy tightening to rein in inflationary pressure.
“Empirical analysis has established that money supply is one of the factors fueling the current inflationary pressure. For instance, an analysis of the trend of the money supply spanning over nine months shows that M3 increased from N52.01tn in January 2023 to N68.25tn in November 2023 representing N16.24tn or 31.22 per cent increase over the period.
“Increase in Net Foreign Asset following the harmonization of exchange rates and the N3.22tn ways and means advances were the major factors driving the increase in money supply.”
He further explained, “I am pleased to note the Fiscal Authorities efforts in discontinuing Ways and Means advances. This is also in compliance with section (38) of the CBN Act (2007), the Bank is no longer at liberty to grant further ways and means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled.
“The Bank must strictly adhere to the law limiting advances under ways and means to five percent of the previous year’s revenue.”
“We have also halted quasi-fiscal measures of over N10tn by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess naira and raising prices to the levels of inflation we are grappling with today.”
The CBN governor further stated that its efforts were beginning to yield results to ease the economic situation in the country.
Cardoso while addressing the issues said, “These measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass-through to domestic inflation.
“Indeed, they have already started yielding early results with significant interest from Foreign Portfolio Investors that have already begun to supply the much-needed foreign exchange to the economy.
“For example, upwards of $1bn in the last few days came in to subscribe to the Nigeria Treasury Bill auction of N1tn which saw an oversubscription earlier this week.”
Cardoso added, “Our measures aimed at improving USD supply into the Nigerian economy, has significant potential in taming the volatility of the exchange rates. However, for these measures to be sustainable, we must as a country, moderate our demand for FX.”
Meanwhile on addressing the issue of the free fall of Naira in exchange for US dollar and other hard foreign currencies, the CBN governor has advised Nigerians to reduce their quest for dollars, consumption and usage of foreign goods.
He emphasized that without moderation of demands on USD, the CBN has no magic wand to hurriedly get naira stabilised.
He, however, informed members of the committee that series of measures put in place by the apex bank recently, are yielding results with inflow of about $1billion into the economy.
He said, “The Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply increased capital outflows, and excess liquidity.
“To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the FX markets. This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs and IMTOs, enforcing the Net Open Position limit, Open Market Operations and adjusting the remunerable Standing Deposit Facility cap among others.”
He added, “Our measures aimed at improving USD supply into the Nigerian economy, has significant potential in taming the volatility of the exchange rates. However, for these measures to be sustainable, we must as a country, moderate our demand for FX.
“It is also clear that the task of stabilizing the exchange rate, while an official mandate of the CBN, would necessitate efforts beyond the Bank itself. It will also include actions by corporates and individuals to reduce our frequent demand for the dollar for business and personal needs”.
On the inflation rate, the apex bank governor assured Nigerians that it will reduce to 21.4% in 2024.
“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4% in the medium term, aided by improved agricultural productivity and easing global supply chain pressures,” he said.
Aside from the CBN governor, the economic team like the Ministers of Finance, Wale Edun; Budget and National Planning, Senator Atiku Bagudu, Agriculture and Food Security, Senator Abubakar Kyari, also made presentations based on questions asked by the lawmakers on the state of the economy.
Senator Sani Musa, who chairs the Senate Committee on Finance, in series of posers fired at the ministers and CBN governor, queried the $3.3bn collected as loan to rescue naira, since expected positive effects were not being felt, months after.
