Home Business N9.8trn Debt: FG’s CBN Borrowings May Raise Risks, Says Fitch

N9.8trn Debt: FG’s CBN Borrowings May Raise Risks, Says Fitch

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Fitch Ratings has said the Federal Government’s repeated recourse to its Ways and Means facility with the Central Bank of Nigeria highlights weaknesses in public finance management.

Fitch Ratings stated this in its report on Wednesday titled ‘Nigeria’s deficit monetisation may raise macro-stability risks’.

The W&M facility is the government’s pre-existing overdraft at the CBN and was estimated at N9.8tn as of the end of 2019.

Part of the report read, “Sustained use of direct monetary financing could raise risks to macroeconomic stability – given the current weak institutional safeguards – but we expect the FGN to reduce its use of the facility in 2021.

“The FGN directly borrowed 1.9 per cent of GDP from the CBN to fund its fiscal deficit in 2020, estimated by Fitch at 3.6 per cent of Gross Domestic Product

“A number of emerging markets resorted to central bank deficit financing in 2020 against a background of urgent spending needs and temporary market dislocations associated with the coronavirus pandemic.

“However, the use of central bank financing in Nigeria predates the pandemic shock.”

The report added, “We estimate that the balance of the government’s WMF with the CBN was around N9.8trillion (6.7 per cent of GDP) at end-2019, up from N5.4trillion (4.2 per cent of GDP) at end-2018.

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