The Central Bank of Nigeria earned N3.1bn as interest on the Federal Government’s overdraft facility in 2024, down sharply from the N1.6tn it earned in 2023, figures from the apex bank’s audited financial statements have shown.
The interest income, categorised under “loans and receivables” in the CBN’s 2024 financials, is tied to the controversial Ways and Means facility—an overdraft provided by the apex bank to the Federal Government to plug short-term fiscal shortfalls.
“Included in interest income on loans and receivables is interest income on overdraft facility granted to the Federal Government, amounting to N3.1bn (2023: N1.6tn),” the CBN stated.
The interest rate applied to the overdraft, it said, was the Monetary Policy Rate plus three percentage points.
The year-on-year decline of 99.8 per cent represents a significant shift in fiscal and monetary policy coordination, as the CBN has moved to curtail the government’s persistent reliance on the overdraft facility.
The drastic drop in interest income comes after the Federal Government securitised N22.7tn worth of outstanding overdrafts in 2023, converting them into 40-year bonds with a three-year moratorium.
The move, approved by the National Assembly, was aimed at easing the inflationary impact of the advances and strengthening the CBN’s balance sheet.
In June 2024, the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, announced that the Federal Government had repaid N7.3tn of the securitised Ways and Means debt.
He also disclosed that the government had stopped relying on the CBN overdraft for debt servicing, stating that all spending was now being executed through a more transparent and accountable framework.
Also, the CBN Governor, Mr Olayemi Cardoso, told lawmakers that the bank would no longer grant further overdrafts to the Federal Government until all outstanding balances were cleared.
The Ways and Means Advances are loan facilities used by the CBN to finance the government during periods of temporary budget shortfalls and are subject to limits imposed by law.
According to Section 38 of the CBN Act, 2007, the apex bank may grant temporary advances to the Federal Government with regard to temporary deficiency of budget revenue at such rate of interest as the bank may determine.
In 2023, there was serious controversy concerning the amount approved by the Central Bank for the government. The former 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.
The Ways and Means facility has drawn criticism over the years for undermining monetary policy and fuelling inflation, with analysts and civil society groups warning that the government’s over-reliance on the overdraft had blurred the line between fiscal and monetary functions.
In 2021, the Office of the Auditor-General of the Federation raised alarm over N2.73tn in allegedly misappropriated interest payments by the CBN, accusing the bank of treating the facility as a loan for its own benefit without proper documentation or transparency.
