The Central Bank of Nigeria (CBN) has stated that heavy debt servicing is taking a toll on lean fiscal resources.
This was disclosed by a member of the CBN board, Prof. Mike Idiahi Obadan in his personal statement at the last MPC meeting.
The debt serving position for Nigeria could hinder the availability of funds to finance critical government programmes and projects.
What the CBN is saying
Obadan noted that the Nigerian economy has been vulnerable to economic shocks without a fiscal buffer, which has led to a borrowing spree.
“The Federal Government has struggled against the tide of two debilitating recessions in five years, occasioned largely by externally-induced shocks including the coronavirus-induced health and economic shocks. With little or no fiscal buffers, it has had to borrow heavily, domestically and externally, to mitigate the negative impacts of the shocks,” he said.
He stated that the skyrocketing debt service to revenue ratio is putting pressure on Nigerian’s fiscal resources. “With the rising debt service-to-revenue ratio, which is currently put at over 90%, heavy debt servicing is taking a toll on lean fiscal resources and could hinder the availability of funds to finance critical government programmes and projects,” Obadan stated.
Obadan stated that against the backdrop of limited domestic revenue mobilisation and little or no foreign exchange inflow from oil and gas exports, the government’s fiscal capacity remains weak and that it requires continued monetary support to drive economic activities towards the desired sustainable growth trajectory.