CBN panel worries about Nigeria’s debt repayment capacity

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The Central Bank of Nigeria’s Monetary Policy Committee has expressed concerns about the country’s debt sustainability in light of the current global uncertainties.

According to the committee, the growing debt profile of the federal government is worrisome, noting that there is an urgent need for the government to diversify its revenue base.

The MPC disclosed this in a document titled “Communiqué No. 143 of the Central Bank of Nigeria of the Monetary Policy Committee Meeting held on Monday 18th and Tuesday 19th July 2022”.

It was posted on the CBN website on Wednesday.

He said: “The committee noted the growing debt profile of the federal government and expressed concerns about debt sustainability given that global uncertainties remain high.

“The MPC thus reiterated its call on the Federal Government to urgently diversify its sources of revenue through various initiatives, such as developing a viable fiscal framework for the extractive and export industries of minerals, in order to strengthen its tax buffers”.

According to the Debt Management Office, Nigeria’s total outstanding public debt rose to N41.60 billion in the first quarter of 2022. Nigeria is estimated to have spent 86% of its revenue on debt service in 2021 .

Recently, the International Monetary Fund projected that the federal government may spend more revenue on debt interest payments in 2022.

He said so in his report “Nigeria Staff Report for the 2021 Article IV Consultation”. He said: “Although interest payments were only 2% of GDP in 2020, approximately 89% of federal government revenue was absorbed by interest payments, reflecting weak revenue raising capacity. interior.

“The FG interest-to-income ratio is expected to decline slightly to about 86% in 2021 and to increase steadily to reach 139% by 2026. A high interest-to-income ratio jeopardizes fiscal space and makes financing current expenditure and capital expenditure heavily dependent on debt financing.

According to the Washington-based lender, higher debt service relative to government revenue (through higher interest rates and/or increased borrowing) poses risks to the country’s fiscal sustainability.

Recently, the Vice President of the Lagos Chamber of Commerce and Industry, Dr. Gabriel Idahosa, said, “Essentially, our debt service is almost equal to our income.

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