The President Bola Ahmed Tinubu administration has drawn scrutiny over its borrowing practices. New data reveals a significant increase in Ways and Means financing, a controversial loan scheme from the Central Bank of Nigeria (CBN).
Nairametrics reports that in the last six months of 2023, the government received an additional N3.8 trillion through Ways and Means. This brings the total outstanding balance to a staggering N8.2 trillion as of December 2023.
This information contradicts previous statements by Finance Minister Wale Edun, who claimed the government hadn’t yet borrowed from the CBN.
What is Ways and Means Borrowing?
Ways and Means is a short-term financing option provided by the CBN to the government to address temporary cash flow shortfalls. However, excessive reliance on this scheme can fuel inflation and destabilize the economy.
Key Points:
- The total Ways and Means balance jumped from N4.4 trillion in June 2023 to N8.2 trillion in December 2023, an 88% increase.
- This contradicts Finance Minister Edun’s earlier claims of no borrowing from the CBN.
- The Tinubu administration inherited a N26.95 trillion Ways and Means balance, which was securitized as domestic debt.
- Monthly borrowing started in July 2023, with September witnessing the highest increase of N1.3 trillion.
Concerns and Implications:
This substantial increase in Ways and Means borrowing raises concerns about the government’s economic management strategy. Critics argue that excessive reliance on this scheme could lead to:
- Inflation: Printing money to finance government spending can weaken the Naira and drive up prices.
- Macroeconomic Instability: Uncontrolled borrowing can create imbalances in the economy.
- Erosion of CBN Independence: Excessive reliance on the CBN for financing could undermine its ability to control inflation and manage interest rates.
