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Before the latest Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) on Friday, January 24, 2020, every executive official of the Federal Government including Ministers, had been claiming that Nigeria’s debt profile is still within manageable limit.
But the apex bank chief, Mr Godwin Emefiele was smart and strong enough to open up at the end of the meeting with a caution on the Federal Government to be wary of further borrowing.
According to Emefiele, 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.
Whereas finance analysts agree that these shortfalls formed key parts of what the Economic Recovery and Growth plan (ERGP), which remains the policy blueprint of the current government intends to resolve, it means that the policy is becoming a failure after all.
Back to the issue of debt, Business Hilights recalls that in far away 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.
However, based on statistics released by the Debt Management Office (DMO), Nigeria’s debt profile as of September 30, 2019 was N26.22tn.
Observers say with dwindling economy forced by dearth of business enabling infrastructure, tax policy inconsistency and possible international shocks on oil prices, any plan to raise the debt profile beyond the current limit may spell down afterwards.
The CBN governor in his press briefing after the MPC meeting averred that “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,” CBN said.
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