WAYS AND MEANS

By Lolu Akinwunmi

This is another lexicon that was made popular under Emefiele the immediate past Central Bank Gov. So what does it mean?

“Ways and Means” refers to a mechanism used by governments to meet short-term cash flow mismatches. It is a form of temporary borrowing from a country’s central bank to help the government bridge gaps in its revenue and expenditure, typically until expected revenues are received.

For example, Ways and Means Advances (WMA), are used by the governments to borrow from the CBN for short-term needs. This borrowing is supposed to be repaid within a specific period, and it is generally used to avoid running out of liquidity when there is a delay in receiving income, such as tax revenue. Under the law, it is not supposed to be more than a specified % of an annual revenue or the budget.

In essence, Ways and Means Borrowing is a fiscal tool that allows governments to manage day-to-day operations without having to immediately resort to issuing long-term debt instruments like bonds. However, it’s a short-term solution and is not meant for sustained borrowing or financing long-term deficits.

In Nigeria, the Ways and Means Advances (WMA) from the Central Bank of Nigeria (CBN) to the Federal Government is capped at 5% of the actual revenue of the previous year. This limit is established under Section 38 of the CBN Act of 2007.

This means that the government can borrow up to 5% of the revenue it collected in the prior year through Ways and Means. The borrowing is typically short-term, designed to cover temporary shortfalls in the government’s budgetary operations. However, there have been instances where this limit has been exceeded, which has led to discussions about fiscal discipline and the sustainability of such borrowing practices.

Exceeding this limit without proper oversight or legislative approval can raise concerns about inflation, debt sustainability, and the overall health of the economy.

‘Lolu AKINWUNMI (frpa), is the Group CEO, Prima Garnet Africa.

* Fellow ARCON

•Past President AAAN

• Past Chairman APCON

• Chairman, Centre for Integrated Health Programmes
• Adjunct Lecturer Pan Atlantic University
• Past Board Member Ogilvy Africa
• Unilag Graduate 1980
• ⁠Author, ‘Skin for Skin: The Prima Garnet Story’

lakinwunmi@
primagarnetafrica.com

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