The Central Bank of Nigeria’s Monetary Policy Committee on Friday cautioned the Federal Government against the rising debt level in the country.
The committee urged the Federal Government to build fiscal buffers to cushion the impact of oil price decline on the economy.
In October 2005, Nigeria and the Paris Club announced a final agreement for debt relief worth $18bn and an overall reduction of Nigeria’s debt stock by $30bn.
The deal was completed on April 21, 2006 when Nigeria made its final payment and its books were cleared of any Paris Club debt.
Based on statistics released by the Debt Management Office, Nigeria’s debt profile as of September 30, 2019 was N26.22tn.
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 governor, however, said there was prospect of improved economic growth this year, adding that the underlying projections were anchored on enhanced flow of credit to real sector; the CBN intervention on agric and the MSME, and effective implementation of the Economic Recovery and Growth Plan.
But he 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.
Revised projections for 2020 show that the economy is expected to grow by 2.50 per cent (according to the International Monetary Fund; 2.10 per cent (World Bank) and 2.35 per cent (CBN).
The MPC also called on government to rationalise fiscal expenditure towards reducing the current excessively high cost of governance.
It urged government to gradually reduce reliance on oil receipts and focus on revenue diversification through reforms of the tax system.
The committee also called on government to rationalise fiscal expenditure towards reducing the current high cost of governance.
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.”
On the rising level of inflation, the apex bank boss said the MPC gave approval that the Cash Reserves Ratio be altered from 22.5 per cent to 27.5 per cent.
The CRR is the share of a bank’s total deposit mandated by the CBN to be maintained with the latter in the form of liquid cash.
The move, according to Emefiele, is part of measures aimed at driving down inflation, which had in the last four months remained high.
Figures from NBS showed that inflation rate had risen to about 11.98 per cent in December, the highest in recent times.
The CBN governor said apart from the CRR that was increased, the committee decided to retain the Monetary Policy Rate at 13.5 per cent.
Also retained are the Liquidity Ratio at 30 per cent; and the Asymmetric Window at +200 and -500 basis points around the MPR.
The apex bank also said that through the implementation of the Loan to Deposit Ratio, about N2tn credit had been provided by banks to the private sector.