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Concerns Over Nigeria’s Ability to Repay Debt by CBN Panel


Given the current state of uncertainty in the world, the Monetary Policy Committee of the Central Bank of Nigeria has expressed concern over the sustainability of the country’s debt.

The committee notes that the federal government’s rising debt profile is concerning and that it needs to urgently diversify its source of income.

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This information was provided by the Monetary Policy Committee (MPC) in a document titled “Central Bank of Nigeria Communiqué No. 143 of the Monetary Policy Committee Meeting Held on Monday, July 18 and Tuesday, July 19, 2022.”

On Wednesday, it was published on the CBN website.

The statement read: “The committee underlined the Federal Government’s rising debt profile and expressed concerns over debt sustainability given the continued high level of global uncertainty.

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“The MPC therefore reiterated its call to the Federal Government to urgently diversify its revenue sources through various initiatives, such as the development of a workable tax framework for the extractive and mineral export industries, to strengthen its fiscal buffers,” reads the statement from the MPC.

Nigeria’s entire public debt stock increased to N41.60 trillion in the first quarter of 2022, according to the Debt Management Office. Nigeria reportedly used 86% of its income in 2021 to pay down debt.

The International Monetary Fund recently forecasted that in 2022, the federal government might spend more money on paying debt interest.

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This was stated in the study titled “Nigeria Staff Report for the 2021 Article IV Consultation.” “Although interest payments represented only 2% of GDP in 2020, they accounted for around 89 % of Federal Government revenues, demonstrating weak domestic revenue mobilization potential,” it was noted.

“It is anticipated that the FG interest-to-revenue ratio will modestly decrease to about 86% in 2021 and then increase rapidly to reach 139% by 2026. Due to the risk posed by a high interest-to-revenue ratio, debt financing is heavily reliant on the financing of current and capital expenditures.

The Washington-based lender claims that dangers exist for the country’s economic sustainability due to higher debt service to government revenues (due to higher interest rates and/or more borrowing).

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Recent comments by Dr. Gabriel Idahosa, Deputy President of the Lagos Chamber of Commerce and Industry, stated that “basically, our debt servicing is practically equivalent to our revenue.


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