Central Bank of Nigeria cautions against rising debt, urges government to focus on revenue diversification

NIGERIA – The Monetary Policy Committee of the Central Bank of Nigeria, the highest policy making committee of the Bank, has cautioned the Federal Government against the rising debt level in the country.

The committee further urged the Federal Government to build fiscal buffers to cushion the impact of oil price decline on the economy.

Based on statistics released by the Debt Management Office, Nigeria’s debt profile as of September 30, 2019 was N26.22tn (about US$72.38 billion).

These levels are higher compared to those in 2005 when Nigeria and the Paris Club announced a final agreement for debt relief worth US$18 billion and an overall reduction of Nigeria’s debt stock by US$30 billion.

The deal was completed on April 21, 2006 when Nigeria made its final payment and its books were cleared of any Paris Club debt.

Addressing journalists shortly after a two-day MPC meeting in Abuja, the CBN Governor, Mr Godwin Emefiele, said the committee noted the rising debt profile and called for caution.

The CBN governor said, “The MPC, however, cautioned that public debt was rising faster than both domestic and external revenue, noting the need to tread cautiously in interpreting the debt to GDP ratio.

“The committee also noted the rising burden of debt services and urged the fiscal authorities to strongly consider building buffers by not sharing all the proceeds from the Federation Account at the monthly Federation Account Allocation Committee meetings to avert a macroeconomic downturn, in the event of an oil price shock.

“It urged government to gradually reduce reliance on oil receipts and focus on revenue diversification through reforms of the tax system.”

The governor said there was prospect of improved economic growth this year, adding that the underlying projections were anchored on enhanced flow of credit to real estate sector; the CBN intervention on agriculture and the MSME, and effective implementation of the Economic Recovery and Growth Plan.

Nigeria’s economy is projected to grow by 2.50 in 2020, according to the International Monetary Fund.

The world Bank and the Central Bank of Nigeria have modest estimates for Africa’s largest economy, projecting it to grow by 2.10 per cent and 2.35 per cent respectively.

Emefiele however, noted that the growth of the economy was being threatened by some factors such as rising public debt; lack of fiscal buffers; insecurity, poor infrastructure and weak private sector investment.

The MPC also called on government to rationalise fiscal expenditure towards reducing the current excessively high cost of governance.

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