"Excessive borrowing frustrating monetary policy, says Central Bank of Nigeria"

" \n Excessive borrowing frustrating monetary policy, says Central Bank of Nigeria \n \n\n \n The Central Bank of Nigeria (CBN) has stated that excessive borrowing by the Federal Government from the CBN\u2019s Means and Ways Advances window could frustrate CBN\u2019s monetary policy. \n \n\n \n The CBN, as the Federal Government of Nigeria \u2019s banker, handles the majority of the government\u2019s banking business both inside and outside Nigeria. \n \n\n \n It also helps the government cover temporary budget gaps using so-called Ways and Means advances (W&M), which are limited by law. \n \n\n \n W&M advances would continue to be available to the FGN to finance deficits up to 5.0% of the previous year\u2019s real collected revenue, according to section 3.2.15 of the CBN\u2019s Monetary, Credit, Foreign Trade, and Exchange Policy set of guidelines released in September 2020. \n \n\n \n What the CBN is saying \n \n\n \n According to the increasing reliance on CBN, overdrafts has come with negative consequences. Under the monetary policy category of the CBN\u2019s Frequently Asked Questions page, it was asked, \u201cCan the Federal Government frustrate the Central Bank of Nigeria from pursuing its monetary policy?\u201d \n \n\n \n The apex bank responded to the question stating, \u201cYes when the Federal government exceeds its revenue, the CBN finance government deficit through Ways and Means Advances subject (in some cases) to the limits set in the existing regulations, which are sometimes disregarded by the Federal Government. \n \n\n \n Read: Nigeria\u2019s private sector borrows $12.4 bn from banks in 11 months 2021 \n \n\n \n \" The direct consequences of the central bank\u2019s financing of deficits are distortions or surges in the monetary base, leading to an adverse effect on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy.\u201d \n \n\n \n The CBN also explain the monetary goals it seeks to achieve saying, \u201dThe ultimate goals of monetary policy are basically to control inflation, maintain a healthy balance of payment position in order to safeguard the external value of national currency and promote adequate and sustainable level of economic growth and development. These goals are achieved by controlling money supply in order to enhance price stability (low and stable inflation) and economic growth.\u201c \n \n\n \n What you should know \n \n\n \n Nigeria\u2019s debt appetite has increased since the start of the decade in 2020, as the country has added N9.3 trillion to its public debt, an average of N4.5 trillion each year during the last two years. This compared to a yearly average of N2.2 trillion in the decade ending in December 2019. \n \n\n \n According to the latest data obtained from the Debt Management Office. Nigeria\u2019s public debt surged to N38 trillion as of September 30th, 2021. \n \n\n \n Ways and Means Advances is a loan facility by the central bank to finance the government during temporary budget shortfalls subject to limits imposed by law. \n "

"Excessive borrowing frustrating monetary policy, says Central Bank of Nigeria"

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