Abuja, March 4, 2024 – The Central Bank of Nigeria (CBN) has advised Nigeria and other West African nations against borrowing from non- traditional lenders.
Olayemi Cardoso, the Governor of the CBN, gave the advice on Monday in Abuja at a Joint World Bank/IMF/WAIFEM Regional Training on Medium Term Debt Management Strategy.
He said traditionally, many nations relied on loans from the Paris Club, a group of lender countries, but of late there had been a shift regarding borrowing practices.
Cardoso said Nigeria was at the risk of falling into debt distress and urged the federal government to look for ways of improving its revenue generation.
Cardoso, who was represented by Dr. Mohammed Musa Tumala, the Director of the Monetary Policy Department of the CBN, said that while the shift in the lenders might seem minor, it had serious implications for development.
He said the way countries manage debts owed to the Paris Club might not be as effective for these new lenders and warned that the new debt sources could pose a threat to financial stability and economic recovery of many countries.
“Public debt dynamics are increasingly influenced by significant debt servicing obligations to non-Paris Club members and private lenders, including commercial banks and bond investors.
“This shift in the debt structure represents a critical evolution in the global financial framework, with profound ramifications for public debt management in our countries.”
He said these non-traditional lenders might even come with stricter repayment terms and potentially higher risks compared to Paris Club loans.
The CBN governor also advised the federal government to remain cautious, particularly regarding potential liquidity risks.
He said these risks, if not addressed effectively, could stem from weak revenue mobilization, a persistent challenge hindering debt sustainability and economic stability. (GBN)
