October 3, 2024/CSL Research

In his address to the nation on Nigeria’s 64th Independence Day anniversary, President Bola Ahmed Tinubu announced that the Federal Government had settled the “ways and means” debt of over ₦30 trillion owed to the Central Bank of Nigeria (CBN). This was one of several positive updates on the administration’s activities shared during the national broadcast. The term “ways and means” originates from 17th century British parliamentary practice, where it referred to “the provision of revenue to meet national expenditure requirements.” According to Section 38 (1) of the CBN Act, borrowing through “ways and means” should only be used temporarily to address shortfalls in budget revenue. Section 38 (2) further stipulates that the total amount of such advances must not exceed 5% of the federal government’s actual revenue from the previous year at any given time.

Under the administration of Muhammadu Buhari, the government’s “ways and means” advances surged from ₦856 billion to ₦23.8 trillion over seven years, far exceeding the 5% ceiling. This figure was later confirmed to have reached ₦30 trillion (including principal and interest) by Barau Jibrin, the Deputy Senate President and former Chairman of the Appropriations Committee in the previous senate. These funds were reportedly used for various intervention programmes, including the Anchor Borrowers Programme. In 2017, actual revenue stood at ₦2.7 trillion, while “ways and means” advances amounted to ₦1.1trillion. This was 37.2% of the 2016 revenue of ₦2.95 trillion. By 2022, actual revenue reached ₦6.49 trillion, but “ways and means” advances had risen to ₦6.4 trillion, representing 138% of the 2021 revenue of ₦4.64 trillion.

In May 2023, the Senate approved the securitization of ₦22.7 trillion of the “ways and means”
loans requested by former President Muhammadu Buhari. Later, in December 2023, the Senate also approved the securitization of the remaining ₦7.3 trillion, as requested by President Bola Tinubu. Securitizing the loan—by converting it into bonds to be held exclusively by the Central Bank of Nigeria (CBN)—offers several benefits. Chief among them is a reduction in the federal government’s debt servicing costs. The new interest rate on the bonds is set at 9% per annum, compared to the previous rate, which was the Monetary Policy Rate plus 3%, charged on the “ways and means” advances.

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