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CBN raises alarm over escalating public debt - NIGERIAN TRIBUNE

JANUARY 25, 2020

Says debt rising faster than revenue


CENTRAL Bank of Nigeria (CBN) Friday raised an alarm over escalating public debts and advised Federal and state governments to reduce emphasis on debt to gross domestic debt (GDP) ratio which could be a less realistic way of measurement to debt to revenue ratio.

At the first meeting of Monetary Policy Committee (MPC) for 2019, nine of all the 11 members present also voted to increase credit reserve ratio (CRR) of banks to 27.5 percent from the previous 22.5 percent.

Last week, Debt Management Office (DMO) disclosed that Nigeria’s total public debts (including for local, states and federal governments) rose to N25.215 by end September 2019.

Reading the communique of the meeting at a press briefing in Abuja, Governor of CBN, Godwin Emefiele said “MPC however cautioned that public debt was rising faster than both domestic and external revenue, noting the need to tread consciously 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 proceeds from the federation account at the monthly FAAC meetings to avert the 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 then tax system.”

Later during question and answer, the Governor further clarified that “there is always a tendency for us to say that our debt level is not high particularly when you begin to compare it to GDP but that yes whereas that is correct but that we begin to look at other ways through which we can raise revenues to be able to fund fiscal operations.

“And that is what the MPC is saying. Let’s not be carried away by the fact that debt to GDP is low or sometimes we say we are even amongst the lowest in the world but that let’s not be carried away by that.

“Let us remain focused and begin to think of the fact that we must do something to raise revenue to begin to fund our operations. That’s where we are on this subject”.

Compared with the previous year overall medium term outlook show that the economy is expected to grow by the World Bank; and 2.35% by CBN.  


CBN projects GDP growth for 2019 at 2.35 percent while IMF and World Bank projected Nigeria’s growth at IMF; 2.1% and 2.5% respectively.

According to MPC, underlying projection was based on enhanced flow of credit to the real sector of the economy; sustained stability in the exchange rate; continuing CBN interventions in the agriculture and non-agricultural small and medium enterprises; and the effective implementation of the ERGP.

(adsbygoogle = window.adsbygoogle || []).push({}); “Downside risk to this projection are primarily the rising stock of public debt and lack of fiscal buffers, persistent security threat in major food producing areas; poor and inadequate infrastructure; and weak public and private sector investment.”

In summary, MPC voted to change the CRR from 22.5 to 27.5%; retain the MPR at 13.5%; retain the Asymmetric Corridor of +200 and -500 basis points around the MPR; and retain the Liquidity Ration at 30%.

Emefiele who noted that with about $38 billion currently in foreign reserve, there was no reason to worry about naira vcalue.

“It is important for us to know that reserve is there to meet the country’s obligation so from time to time reserves will go up, reserves will come down.

“Yes it is no doubt noticeable the drop has become so noticeable that people are beginning to say will they result in adjustment in the currency at a reserve level of about $38 billion today and crude price at above $67 per barrel sometimes hitting $70/barrel, we are saying that we should continue to sustain the existing foreign exchange management and stability that we’ve seen in the market.

“There is no need for anybody to ever think that an adjustment will happen the CBN is able to meet all obligations, the reserve level is high and strong enough to be able to meet all obligations in the economy and so there is no need for anybody to contemplate that.

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