Cardoso’s CBN cuts government advances by 58%, signaling new fiscal discipline

Under the leadership of Governor Yemi Cardoso, Nigeria’s Central Bank (CBN) has significantly reduced its direct lending to the federal government, known as Ways and Means advances. This move signals a renewed focus on fiscal discipline and adherence to statutory limits.

Recent figures from the CBN’s published financials, released as part of a broader push for transparency under President Bola Ahmed Tinubu’s administration, show a marked decrease in these advances. According to the data, Ways and Means fell by 58% to ₦3.26 trillion in 2024, down from ₦7.94 trillion recorded in 2023.

This reduction marks a significant departure from the previous era under former CBN Governor Godwin Emefiele. During his tenure, reliance on Ways and Means financing surged dramatically, reportedly rising by approximately 2900% to peak at ₦23.3 trillion by the end of 2022. Financial statements revealed that the CBN extended ₦6.2 trillion to the government in 2022 alone. This practice drew criticism from economists and institutions, for potentially fueling inflation and exceeding the legal limits stipulated in the CBN Act (which generally caps advances at 5% of the previous year’s actual government revenue).

President Tinubu’s administration has prioritised addressing the CBN’s governance and operations. Shortly after taking office and following early, decisive economic reforms such as unifying the exchange rate regimes and ending a costly fuel subsidy program estimated at $10 billion annually—Tinubu appointed a special investigator to examine the bank’s affairs. This investigation preceded the publication of the CBN’s audited financial statements, made available to the public for the first time in seven years, enhancing transparency despite political opposition and controversies faced by the administration.

The curtailing of Ways and Means advances is viewed by analysts as a crucial step towards restoring macroeconomic stability and curbing inflationary pressures.

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“The reduction is a good thing, because it suggests less reliance of the government on CBN advances, which would indicate better fiscal management on the part of the government and even transparency,” Samuel Oyekanmi, an analyst at Norrenberger, told Condia.

However, Nigeria continues to grapple with significant economic headwinds. The nation faces persistent budget deficits, high inflation exacerbated partly by recent economic reforms and currency devaluation, despite periods of temporary stability in the exchange rate for the past four months of the year.

“Printing more money into the economy is how we ‘got’ here in the first place from the fall-out of the COVID-19 pandemic. So not printing more money is the way to go, however, indirect taxes by businesses and individuals may increase, but not direct taxes,” Oyekanmi added.