CBN MPC members raise concerns over government debt structure and borrowing

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Members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) have expressed concern over the growing component of Eurobonds in Nigeria’s external debt structure.

They noted that the federal government’s preference for Eurobonds at high interest rates, with the associated exchange rate risk, could likely hurt Nigeria sooner rather than later.

In his personal statement in the just released May 2022 meeting communiqué, a member of the Committee, Asogwa Robert, said: “The escalation of fiscal sector deficits with rising debt ratios The result is one of the weak links in the national economic environment. .

The growing accumulation of Eurobonds in the external debt component while minimizing concessional lending was particularly worrying about the debt structure. The government’s unexplained preference for Eurobonds at high interest rates, with the associated exchange rate risk, could likely hurt Nigeria sooner than expected.

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“Already, Nigeria is mentioned by the IMF (International Monetary Fund) as one of the countries likely to find itself in a situation of debt distress, given the staggering stock of $100.07 billion in public debt as of 31 March 2022.”

On his part, another member of the MPC, Mr. Adenikinju Festus, said in his personal statement: “I fear that Nigeria will not be able to take full advantage of the current advantages of the world oil market. “I am concerned about the government’s fiscal performance. The increasing share of governments in total credit to the economy by the banking system suggests crowding out effects of private sector borrowing.

“The government should move towards means other than debt to finance its activities. The government must increase its revenue base, reduce exemptions for economic agents, plug leaks and waste, and tackle the wasteful gasoline subsidy system.

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