CBN Reduces FG Loans by N4 Trillion in 2024: A Bold Step Toward Economic Stability
In a landmark development, the Central Bank of Nigeria (CBN) has slashed its net loans and receivables to the Federal Government by a staggering N4 trillion in 2024.
This decisive move signals a return to fiscal discipline and a commitment to economic stability under Governor Olayemi Cardoso.
As Nigeria grapples with inflation, currency volatility, and dwindling investor confidence,
the CBN’s action could mark a turning point in the country’s economic trajectory.
CBN’s 2024 Financial Shift:
A New Monetary Direction For years,
the CBN operated in an expansive fiscal environment, characterized by unchecked lending to the Federal Government.
The 2024 audited financials reveal a dramatic shift:
Net loans at the bank level dropped from N16.12 trillion in 2023 to N11.98 trillion.
At the group level, the figure fell from N15.09 trillion to N10.96 trillion.
This significant contraction in credit exposure underscores the bank’s renewed focus on its primary mandate: maintaining monetary stability.
Understanding Ways and Means Advances:
A Brief Background The “Ways and Means”
provision allows the Central Bank to lend money to the Federal Government to cover shortfalls in its budget.
However, under the previous administration, this facility was heavily overutilized, leading to unsustainable debt levels and inflationary pressures.
In 2023, the National Assembly approved the securitization of N22.7 trillion in outstanding Ways and Means advances
essentially converting short-term borrowing into long-term debt instruments.
This paved the way for a sharp reduction in overdraft facilities:
From N7.95 trillion in 2023 to N3.27 trillion in 2024.
A massive 58.89% drop within one fiscal year.
Revenue and Lending Dynamics:
A Paradigm Shift The bank’s revenue from lending to the Federal Government took a major hit:
Earnings from FG overdrafts plunged from N1.6 trillion to just N3.1 billion.
Conversely, the Standing Lending Facility (SLF) which supports short-term interbank liquidity rose sharply:
From N29.43 billion in 2023 to N386.9 billion in 2024.
This suggests a healthier banking environment where commercial banks increasingly rely on structured borrowing mechanisms rather than fiscal handouts.
Long-Term Loans and AMCON Notes:
Stabilizing Tools While short-term exposure declined, long-term financial tools saw increased utilization:
Long-term loans grew from N2.01 trillion to N2.72 trillion.
AMCON (Asset Management Corporation of Nigeria) Notes rose from N3.9 trillion to N4.14 trillion.
These instruments are essential in absorbing financial shocks and maintaining market confidence.
They also reflect the CBN’s strategy of supporting financial institutions without directly monetizing government debt.
Internal Lending and Staff Welfare Interestingly, loans categorized as “Other Loans” declined modestly:
From N539.3 billion to N530.6 billion.
However, staff loan facilities rose slightly to N65.6 billion, indicating ongoing investment in employee welfare and productivity.
Treasury bonds remained relatively stable at N423 million.
Clearing Past Liabilities:
Promissory Notes and NESI Debentures The CBN made notable progress in settling legacy obligations:
N23.03 billion in Promissory Notes cleared.
N802.91 billion NESI Debentures settled.
NESI (Nigeria Electricity Supply Industry) Special Purpose Vehicle plays a pivotal role in addressing power sector liquidity.
This debt clearance strengthens the credibility of the energy reform agenda.
The Broader Picture:
Overall Loan Contraction The total gross loans recorded a dramatic reduction:
Group level: From N16.39 trillion to N12.77 trillion.
Bank level: From N17.42 trillion to N13.78 trillion.
In parallel, the Expected Credit Loss (ECL) provisions increased,
a sign that the CBN is tightening credit assessment protocols.
This move promotes transparency and protects the bank’s balance sheet.
Wind-down of Intervention Schemes:
Focus on Core Mandate Governor Cardoso’s leadership marks a departure from intervention-heavy strategies.
The CBN has started phasing out several development finance programs:
N252.9 billion recovered at the bank level.
N224.6 billion at the group level.
These include recoveries from flagship schemes such as:
Anchor Borrowers’ Programme: N112.9 billion
Commercial Agric Credit Scheme: N43.3 billion
Real Sector Support Facility: N37.5 billion
Bank of Industry Debentures, Export Development Fund, and MSMEs support programs.
Ongoing Interventions:
The Long Road Ahead Despite this progress, some programs continue to tie up significant capital:
NIRSAL Debenture rose slightly to N269.38 billion.
MSMEs Loan remained steady at N442.7 billion.
Other programs like the Mortgage Refinance Scheme and Youth Investment Funds showed minimal but sustained activity.
These figures highlight the complexity of fully unwinding intervention programs without causing disruption to critical sectors.
Economic Implications:
What This Means for Nigerians The CBN’s strategy could have multiple benefits for the average Nigerian:
1. Reduced Inflationary Pressure: Limiting direct lending to the FG curtails excess money supply, potentially easing inflation.
2. Stronger Naira: Lower government borrowing could strengthen the naira by boosting investor confidence and curbing external debt.
3. Increased Private Sector Access: With the CBN reducing its fiscal exposure, more credit may be available for private businesses and entrepreneurs.
4. Lower Interest Rates in the Long-Term: As government demand for loans falls, interest rates could stabilize or even drop.
Expert Views and Market Reactions Financial analysts have largely applauded the CBN’s move:
Dr. Tunde Bakare, a Lagos-based economist, notes:
“This is the most fiscally responsible stance we’ve seen from the apex bank in nearly a decade.”
The Nigerian Stock Exchange responded positively, with banking sector stocks seeing mild gains in the weeks following the CBN’s report.
International financial institutions like the IMF and World Bank are also watching closely.
A stable and autonomous central bank is key to attracting long-term foreign direct investment.
Governor Cardoso’s Legacy in the Making Since assuming office,
Governor Cardoso has set a clear agenda:
strengthen institutional frameworks, reduce market distortions, and restore the CBN’s credibility.
His refusal to continue with blanket intervention programs marks a clear departure from predecessors.
If successful, these reforms could reshape Nigeria’s economic future,
enhance financial stability, and reduce the nation’s reliance on debt-driven governance.
Do you support the CBN’s decision to reduce lending to the Federal Government?
What impact do you think this will have on inflation and business growth?
Drop your thoughts in the comment section and follow NIGPOST for more expert economic coverage.
Author: Samuel akintude
Date: May 19, 2025
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