Economic Quagmire: How Abuse of Ways & Means Propelled Inflation Surge, Severe Challenges Ahead

In the wake of mounting controversies surrounding the securitization of Ways & Means, economists and financial analysts warn of substantial threats to price stability, fueling persistent inflationary pressures. December 2023 saw inflation climb to 28.92%, with projections indicating a further surge beyond 30% in Q1 2024.

The Central Bank of Nigeria (CBN) finds itself entangled in a struggle to rein in excess money circulating outside the banking system, largely stemming from the abuse of Ways & Means—a loan facility used by the government to address budget shortfalls, primarily through cash printing.

Criticism intensifies over the approval of the N7.3 trillion securitization granted to President Bola Tinubu, as experts caution against flouting the CBN’s Act on borrowing limits. Despite the Act capping Ways & Means borrowing at 15%, the fiscal operations from 2015 to 2023 showcased a staggering 60% ratio of Ways & Means to average annual revenue.

President of the Nigeria Economic Society, Prof. Adeola Adenikinju, underscores the need for adherence to fiscal discipline, emphasizing that the abuse of Ways & Means has contributed to rising inflation and undermined the efficacy of monetary policies.

Meanwhile, concerns over securitization implications are voiced by experts. Dr. Francis A. Eniekezimene points out potential consequences, including an increase in inflation rate, a strain on the exchange rate, and the issuance of 40-year bonds that burden future generations.

Former Director General of Lagos Chamber of Commerce & Industry, Dr. Muda Yusuf, emphasizes the significant damage inflicted by Ways & Means financing on the economy, urging strict compliance with the CBN Act.

Tajudeen Olayinka, CEO of Wyoming Capital and Partners, highlights the potential illegality of engaging in securitized Ways & Means Advances, calling for a systematic offloading to prevent crowding out private sector borrowers.

As the government grapples with financial challenges, David Adonri, Analyst, and Executive Vice Chairman at Highcap Securities Limited, paints a grim picture, emphasizing the dire financial situation faced by the Federal Government and the compounding effects of unorthodox financing methods.