In a move to curb the rising inflationary trend, Central Bank of Nigeria (CBN) Governor Oluyemi Cardoso announced the suspension of N10 trillion intervention funds previously implemented as quasi-fiscal measures.
The governor who made the announcement on Friday while addressing a joint Senate committee, highlighted empirical analysis linking the money supply to the current inflationary pressures in the country.
The governor revealed a notable surge in money supply, citing M3’s increase from N52.01 trillion in January 2023 to N68.25 trillion in November 2023, representing a substantial 31.22 percent rise over the nine-month period.
Factors such as the increase in net foreign assets (NFA) following exchange rate harmonisation and N3.22 trillion in ways and means advances were identified as contributors to the heightened money supply.
Cardoso emphasised the discontinuation of quasi-fiscal measures, previously cloaked as development finance interventions, attributing them to the escalated inflation levels.
The apex bank governor in the same vein declared a significant shift in the bank’s approach towards providing ways and means to the Federal Government, says no more cash advance until previous debt paid.
He said Ways and Means, a temporary financial assistance provided by the CBN to the federal government, it would no longer be extended until previous loans were fully repaid.
This strategic move , according to him is part of a broader effort to mitigate the economic challenges currently confronting Nigeria.
Analysing the money supply trend over nine months, he revealed a substantial increase, citing factors such as net foreign asset growth and Ways and Means advances.
In compliance with Section 38 of the CBN Act (2007), Cardoso announced that the bank is constrained from granting further Ways and Means advances until the outstanding balance as of December 31, 2023, is settled.
He highlighted the discontinuation of quasi-fiscal measures by the CBN, which previously contributed to excess Naira and inflation.
Cardoso reassured that the CBN’s adoption of an inflation-targeting framework, coupled with collaboration with fiscal authorities, aims to achieve price stability.
This could potentially lead to lowered policy rates, increased investment, and job creation. The governor affirmed that these efforts are already yielding posiitve.