FG’s Penchant For Borrowing Will Lead To Debt Service Challenges, CBN Warns

The Central Bank of Nigeria has expressed concern over the rising debt stock which could land the country into future debt service challenges.

The apex bank governor, Godwin Emefiele, said this during the 277th Monetary Policy Committee meeting.

The MPC made the position as the Debt Management Office said Nigeria’s debt stock has risen to N32.2trn ($84.5bn) as of September last year.

The Minister of Finance, Mrs Zainab Ahmed had last week disclosed that Nigeria spent N3.27trn on debt servicing obligation in 2020.

In the 2021 fiscal period, the sum of N3.324trn was allocated for debt servicing, amidst the country’s struggling revenue.

In the last MPC meeting, the apex bank expressed concern over the rising debt profile and the priority given to recurrent expenditure over capital expenditure.

Emefiele said, “The Committee expressed concern over the rising public debt stock, as recurrent expenditure remained relatively high, compared with capital expenditure, thus, signaling future debt servicing challenges.”

The Federal Government will execute a fiscal spending of N13.58trn in 2021, out of which revenue of N7.89trn was projected, leaving a deficit of N5.2trn.

With planned borrowing of N5.2trn in 2021, total public debt stock is expected to rise to N38.68tn by December 31, 2021, according to Minister of Finance, Budget and National Planning, Zainab Ahmed.

According to the copy of the approved budget seen by THE WHISTLER, only N4.12trn was allocated to Capital expenditure, while a chunk of N5.64trn was allocated to recurrent expenditures.

But the allocation for capital expenditure for 2021 budget is an improvement compared to the 2020 budget where N2.48trn was allocated to capital expenditure.

Experts have argued that the country may face infrastructure decay, while N4.9trn was allocated to recurrent expenditure.

CBN said to avert future debt service crisis, the Federal Government must redouble its efforts at strengthening infrastructural efficiency.

Emefiele said government needs to explore the option of effective partnership with the private sector to improve funding sources necessary to address the huge infrastructural financing deficit.