From Adanna Nnamani, Abuja

Despite concerns linked to poor global market conditions and the government’s rising debt burden since Covid19, the Central Bank of Nigeria (CBN), has said that the debt situation in the country is stable.

The CBN governor, Mr Olayemi Cardoso, disclosed this at a workshop on Medium Term Debt Strategy (MTDS) in Abuja on Monday.

The training was organised by the World Bank, the International Monetary Fund (IMF) and the West African Institute For Financial and Economic Management (WAIFEM).

According to Cardoso, Nigeria’s external debt-to-GDP ratio is a manageable 9%, indicating cautious external borrowing and that 85% of the nation’s debt has medium to long-term maturities.

In terms of debt sustainability, he said Nigeria is in a comparatively favourable situation given its debt level of 37% GDP, which is lower than the average of 50% GDP for emerging and developing economies.

The CBN governor, however, warned, despite overall moderate risk assessments, there is a need to keep an eye on potential liquidity risks, particularly as regards weaknesses in revenue mobilisation and persistent challenges which could undermine debt sustainability and financial stability if not adequately tackled.

He said: “Like other developing and emerging economies, Nigeria’s experience with the MTDS is a significant aspect of its broader medium-term economic management and fiscal policy framework. The MTDS has always guided its debt management activities, the most recent being the MTDS 2020- 2023. The country has periodically developed and updated its MTDS to reflect changing economic conditions, funding needs, and the global financial environment.

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“The primary goals of Nigeria’s MTDS have been to ensure that borrowing activities are conducted within sustainable levels, to optimise the debt portfolio for cost and risk, and to improve debt management capabilities.

While significant progress has been made in implementing the strategy, ongoing challenges related to exchange rate volatility, inadequate revenue generation, and external shocks, such as oil price volatility, would necessitate continuous refining of the MTDS to address these challenges and leveraging opportunities.

“Nigeria is currently assessed to be at a “moderate” overall risk of sovereign stress. This assessment is crucial in understanding the effectiveness and challenges of Nigeria’s MTDS. Nigeria’s situation is stable despite the near-term risks attributed to unfavourable global market conditions and the increased debt burden since the pandemic. Significantly, the external debt-to-GDP ratio is a manageable 9%, indicating cautious external borrowing. Most (85%) of its debt has medium to long-term maturities, and compared to the emerging and developing economies’ average of 50% GDP, Nigeria’s debt level at 37% GDP shows it’s in a relatively favourable position regarding debt sustainability.

“However, despite the generally moderate risk assessments, Nigeria must remain vigilant, especially regarding potential liquidity risks. If not adequately addressed, these risks could arise from weak revenue mobilisation, a persistent challenge undermining debt sustainability and economic stability.”

Also speaking, Dr Baba Musa, Director-General, WAIFEM, said the importance of the training could not be overstated, considering the prominence public debt management has assumed on the global development agenda.

According to Musa, rising public debt levels have emerged as a significant point of concern, especially in developing nations, where higher debt levels are coupled with greatly restricted fiscal space and limited opportunities for concessional finance.

He quoted the latest World Bank/IMF data which says that of the 69 Poverty Reduction and Growth Trust (PRGT) eligible countries, 13 out of 69 are in debt distress, with an additional 26 at high risk of debt distress.

“These developments underline a critical juncture in public debt management and the urgent need for comprehensive strategies to stop further progression into debt crises,” the DG pointed out.