Nigeria’s debt fast approaching pre-2005 Paris Club level, CBN warns

The monetary policy committee of the Central Bank of Nigeria (CBN) has warned that the federal government’s debt levels could be fast approaching the pre-2005 levels.

Reading the communique of the committee’s decision at the end of its bi-monthly meeting on Tuesday, Godwin Emefiele, the CBN governor, said: “On external borrowing, the committee noted the increase in debt level advising for caution, noting that it could fast be approaching the pre-2005 Paris Club level.”

On October 20, 2005, Nigeria reached an $18 billion debt relief agreement with Paris Club. Nigeria was required to pay $12.4 billion of its $30 billion debt stock in three tranches.

Ngozi Okonjo-Iweala, who was the minister of finance at that time, led the Nigerian delegation while Xavier Muscat, chairman of the Paris Club, led the 15-member club to sign the agreement.

The deal saw Nigeria exit the club completely after the final payment was made on April 21, 2006.

According to data released by the Debt Management Office, Nigeria’s external debt stood at $21.6 billion as at September 30.

Speaking on the federal government’s plan to raise more revenue through value-added tax, Emefiele said the committee was of the view that it would help reduce pressure on government expenditure.

“The committee also noted the attempts by the government to broaden the base of the Value Added Tax and urge the authorities to expedite action in that effect, arguing that increased tax collection will reduce pressure on government expenditure and create fiscal buffers to improve macroeconomic management,” he said.

The monetary policy rate was retained at 14% while the Cash Reserves Ratio was maintained at 22.5%.

Liquidity ratio was left at 30% and the Asymmetric Window was left at +200 and -500 basis points around the MPR.