The Central Bank of Nigeria (CBN) earned N3.1 billion as interest on the Federal Government’s overdraft facility in 2024, marking a dramatic decline from the N1.6 trillion it received in 2023, according to the bank’s newly released audited financial statements.
The earnings were recorded under the “loans and receivables” section of the CBN’s 2024 financial report and are linked to the contentious Ways and Means facility, which serves as an overdraft granted by the CBN to the Federal Government to cover short-term budget deficits.
“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 bank disclosed.
The interest on the overdraft was calculated at the Monetary Policy Rate (MPR) plus an additional three percentage points.
The year-on-year fall of 99.8 per cent signals a significant recalibration in the relationship between fiscal and monetary policy, as the central bank takes steps to curb the Federal Government’s routine use of the overdraft facility.
This steep reduction in interest income followed the Federal Government’s securitisation of N22.7 trillion in outstanding overdrafts in 2023, effectively converting them into 40-year bonds with a three-year moratorium. The restructuring, which was approved by the National Assembly, aimed to mitigate the inflationary consequences of the overdrafts while also reinforcing the central bank’s financial position.
In June 2024, the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, announced that the government had repaid N7.3 trillion of the securitised debt under the Ways and Means scheme. He also revealed that the Federal Government had ceased relying on the CBN overdraft to service debt, stating that all public expenditure was now conducted through a more transparent and accountable system.
Meanwhile, CBN Governor Mr Olayemi Cardoso informed lawmakers that the bank would not approve further overdrafts for the Federal Government until all outstanding liabilities had been cleared.
The Ways and Means Advances are a form of temporary credit extended by the CBN to bridge budgetary gaps and are regulated by specific legal parameters. According to Section 38 of the CBN Act, 2007, the central bank may provide short-term advances to the Federal Government in the event of a temporary revenue shortfall, applying an interest rate at its discretion.
In 2023, the Ways and Means facility became the centre of controversy over its alleged misuse. Former CBN Governor Godwin Emefiele reportedly authorised the printing of N22.7 trillion for former President Muhammadu Buhari without the consent of the National Assembly, raising concerns about constitutional breaches and fiscal discipline.
The facility has long been criticised for distorting monetary policy and contributing to inflation. Economists and civil society organisations have repeatedly warned that the government’s excessive dependence on the overdraft has eroded the separation between monetary and fiscal responsibilities.
In 2021, the Office of the Auditor-General of the Federation flagged what it described as N2.73 trillion in questionable interest payments by the CBN. The office accused the apex bank of treating the facility as a personal loan scheme without proper documentation or transparency.
