CBN Governor Set New Strategy To Puts An End To “Ways and Means” Practice

CBN Governor Set New Strategy To Puts An End To “Ways and Means” Practice

In a bold move to address the ongoing economic challenges in Nigeria, Central Bank Governor Dr. Olayemi Cardoso has declared an end to the practice of providing “Ways and Means” to the government until outstanding loans are repaid….READ ALSO CBN Governor Cardoso Reports $1 Billion Boost In Market Amid Policy Success

This announcement marks a significant shift in economic policy aimed at stabilizing the country’s financial landscape.

Ways and Means typically involves the Central Bank lending money to the government temporarily to cover spending until revenue is generated. However, previous administrations allegedly abused this mechanism, leading to substantial loans being extended without proper oversight.

During a meeting with Senate Committees on Finance, Appropriations, Banking, Insurance, and other Financial Institutions, Governor Cardoso emphasized the need to curb inflationary pressures and restore fiscal discipline. He highlighted the detrimental effects of unchecked money supply and quasi-fiscal measures, which have contributed to rising inflation and currency devaluation.

The governor’s decision to halt further Ways and Means advances aligns with the CBN Act of 2007, which restricts such advances to five percent of the previous year’s revenue. This measure aims to enforce accountability and prevent excessive government borrowing from the central bank.

Additionally, Governor Cardoso outlined a comprehensive strategy to enhance liquidity in the foreign exchange market, including unifying FX market segments, clearing outstanding obligations, and introducing operational mechanisms for currency dealers. These measures seek to stabilize the exchange rate and attract foreign investment, ultimately bolstering the country’s economic resilience.

While acknowledging the challenges posed by speculative forex demand and capital outflows, Governor Cardoso called for moderation in the consumption and usage of foreign goods to reduce pressure on the naira. He emphasized the importance of collective efforts in achieving exchange rate stability, highlighting the role of both individuals and corporations in managing demand for foreign currency.

Looking ahead, the CBN governor expressed optimism about reducing inflation to 21.4% in 2024, citing targeted policies and improved agricultural productivity as key drivers of this downward trend. However, he underscored the need for sustained efforts to address systemic issues and promote long-term economic sustainability.

As Nigeria navigates its economic recovery journey, Governor Cardoso’s decisive actions signal a renewed commitment to fiscal prudence and monetary stability, laying the foundation for sustainable growth and development in the years to come.