Huge government debts weakening Nigeria’s financial system

Nov 25, 2016

Accumulated government debts is compromising the integrity of financial system in Nigeria

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria on Tuesday warned that the huge government debts is weakening Nigeria's financial system and urged the Federal Government to assess the amount of its domestic indebtedness and create a framework for paying these debts. Reading the committee's communiqué, the CBN governor stated that "Members of MPC stressed the need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations. "The MPC urged the Federal Government to urgently assess the extent of its indebtedness to domestic economic agents and develop a framework for securitising the debts in order to settle its outstanding domestic contractual obligations, which cut across all sectors of the economy. "These accumulated debts have slowed the business activities of economic agents, most of who are indebted to the banking system, thus compromising the integrity of the financial system. It also advised the bank (CBN) to commit to greater surveillance and deployment of early warning systems in managing the banking system." According to the Debt Management Office of Nigeria, Nigeria's total domestic debt stands at N10.6 trillion as of June 30, 2016 which excludes Federal Government bonds in the sum of N680.42billion issued to restructure states' commercial debt.