Cardoso, who made the declaration on Friday when he, alongside the economic team met with the Senate Committees on Finance, Appropriations, Banking, Insurance, and Other Financial Institutions, said that it was one of the measures CBN is taking to curtail the current economic crisis plaguing Nigeria.
The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has declared that the country’s apex bank will suspend giving the President Bola Tinubu-led Nigerian government Ways and Means until the previous loans are repaid.
Cardoso, who made the declaration on Friday when he, alongside the economic team met with the Senate Committees on Finance, Appropriations, Banking, Insurance, and Other Financial Institutions, said that it was one of the measures CBN is taking to curtail the current economic crisis plaguing Nigeria.
Ways and means is the money that the CBN lends to the Nigerian government in the meantime to augment spending based on the time the revenue is generated.
Recall that the Senate had summoned the economic team including the CBN governor, Minister of Finance, Wale Edun; the Minister of Budget and Economic Planning,
Atiku Bagudu, the Minister of Agriculture, Abubakar Kyari to address the current economic situation and more importantly, the free fall of the Naira and hike in prices of food.
The Punch quoted Cardoso as saying that “On our side at the CBN, we have responded with significant monetary policy tightening to reign in inflationary pressure.
“Empirical analysis has established that money supply is one of the factors fueling the current inflationary pressure. For instance, an analysis of the trend of the money supply spanning over nine months shows that M3 increased from N52.01 trillion in January 2023 to N68.25tn in November 2023 representing N16.24tn or 31.22 percent increase over the period.
“Increase in Net Foreign Asset following the harmonisation of exchange rates and the N3.22tn ways and means advances were the major factors driving the increase in the money supply.”
The apex bank boss also said, “I am pleased to note the Fiscal Authorities efforts in discontinuing Ways and Means advances. This is also in compliance with Section (38) of the CBN Act (2007), the Bank is no longer at liberty to grant further Ways and Means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled.
“The bank must strictly adhere to the law limiting advances under ways and means to five percent of the previous year’s revenue.
“We have also halted quasi-fiscal measures of over N10tn by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess Naira and raising prices to the levels of Inflation we are grappling with today.”
According to him, “The CBN’s adoption of the inflation-targeting framework involves clear communication and collaboration with fiscal authorities to achieve price stability, potentially leading to lowered policy rates, stimulating investment, and creating job opportunities.”
Cardoso, who further stated that the CBN’s efforts were beginning to yield results to ease the economic situation in the country, said that “Our MPC meeting on the 26th and 27th of February is also expected to review the situation and take further decisions on these important issues.
“Distinguished Senators, Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 percent in the medium term, aided by improved agricultural productivity and easing global supply chain pressures.”
He further said, “Distinguished Senators, these measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilise the exchange rate, and minimise its pass-through to domestic inflation.
“Indeed, they have already started yielding early results with significant interest from Foreign Portfolio Investors that have already begun to supply the much-needed foreign exchange to the economy.
“For example, upwards of $1bn in the last few days came in to subscribe to the Nigeria Treasury Bill auction of N1tn which saw an oversubscription earlier this week.
“Our measures aimed at improving USD supply into the Nigerian economy, have significant potential in taming the volatility of the exchange rates. However, for these measures to be sustainable, we must, as a country, moderate our demand for FX.”
On the issue of the free fall of the Naira in exchange for the US dollar and other hard foreign currencies, Cardoso advised Nigerians to reduce their quest for dollars, consumption, and usage of foreign goods.
The CBN governor emphasised that without moderation of demands on USD, the CBN has no magic wand to hurriedly get Naira stabilized.
However, he told the lawmakers that a series of measures put in place by the apex bank recently are yielding results with an inflow of about $ 1 billion into the economy.
According to him, “The Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply, increased capital outflows, and excess liquidity.
“To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the FX markets. This includes unifying FX market segments,
clearing outstanding FX obligations, introducing new operational mechanisms for BDCs and IMTOs, enforcing the Net Open Position limit, Open Market Operations and adjusting the remunerable Standing Deposit Facility cap among others.
“Our measures aimed at improving USD supply into the Nigerian economy, have significant potential in taming the volatility of the exchange rates. However, for these measures to be sustainable, we must as a country, moderate our demand for FX.
“It is also clear that the task of stabilizing the exchange rate, while an official mandate of the CBN, would necessitate efforts beyond the Bank itself. It will also include actions by corporates and individuals to reduce our frequent demand for the dollar for business and personal needs”.
Speaking on the rising inflation rate, Cardoso ssured Nigerians that it will reduce to 21.4% in 2024.
He said, “Distinguished Senators, Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 percent in the medium term, aided by improved agricultural productivity and easing global supply chain pressures.”
The Punch also reports that during the meeting, Senator Sani Musa who chairs the Senate Committee on Finance, in a series of posers fired at the Ministers and CBN Governor, queried the $3.3bn collected as a loan to rescue Naira since expected positive effects are not being felt, months after.